BP caps horror week with credit rating cut

BP pressed on with its bid to cap the Gulf of Mexico spill yesterday amid a new blow to its tattered image as a credit agency warned the clean-up costs will weigh on the oil giant for years.

A day after BP chief executive Tony Hayward was given a public mauling by US lawmakers, a top credit agency slashed the credit worthiness of the British energy giant because of the “worsening impact” of the disaster on its finances.

Moody’s Investors Service cut BP’s credit rating by three notches following a similar move by Fitch and Standard & Poor’s this week.

“The rating agency believes that uncertainty over the ultimate cost for massive litigation claims and other contingent liabilities will be an overhang on BP’s credit worthiness that will persist for years to come,” it said.

It was another slap in the face for the company, which this week agreed to set aside $20 billion (€16bn) in an escrow fund over the next four years to pay compensation to the stricken Gulf residents.

A day after being summoned to the White House by President Barack Obama, Hayward was pilloried by US lawmakers on Thursday investigating the causes of the April explosion.

To the frustration and anger of the House panel, he repeatedly refused to be drawn on the causes of the explosion and whether there had been any negligence on BP’s part, drawing lawmakers’ ridicule and scorn.

US experts believe between 35,000 and 60,000 barrels are spewing into the Gulf every day from the ruptured wellhead, and creeping ashore in four southern US states, shutting down the fishing industry and sullying tourist beaches.

Seeking to end a nightmare week on a high note, officials said BP was now containing more of the spill as it works towards capping it for good.

“In the 24-hour period ending at midnight last night, we were able to recover 25,000 barrels of oil,” Thad Allen, the US Coast Guard admiral coordinating the response to the worst oil spill in US history, told reporters.

Allen said the flow rate technical group estimates the flow to be “right now, the mid-30s – I think is the most probable – and as high as 60.”

And he stressed the first of two relief wells, seen as the only way to permanently cap the spill, was closing in on the original well.

“The first relief well is now 10,677 feet (3,235 meters) below the sea floor (and) starting to close in on the well,” Allen said, without providing a time frame for when it would be completed.

On Thursday Allen said engineers were ahead of their mid-August target date for completing the drilling of the first relief well.

In a sign of the growing global impact of the worst environmental disaster in US history, the intergovernmental International Energy Agency (IEA) warned against following the US lead and imposing a moratorium on offshore drilling.

Global oil output could slide by up to 900,000 barrels a day from projected levels for 2015 if oil producing countries take their cue from the six-month moratorium imposed by Obama in the wake of the disaster.

“If other countries like Angola, Brazil and the North Sea (countries) put on hold new offshore development and there is also one or two years of delay, the impact on global oil output might be 800,000 barrels a day to 900,000 barrels a day by 2015,” IEA executive director Nobuo Tanaka told Dow Jones.

“There is little near-term impact. But for the medium term, if new offshore oil development in the US is delayed by one or two years, the impact (on production) would be 100,000 barrels a day to 300,000 barrels a day by 2015,” Tanaka added.

BP’s share price shed 2.25p or 0.62% yesterday to 357.45 pence, having gained 6.74% in value on Thursday as traders welcomed clarity over the group’s costs and dividend suspension.

It has been given “a fairly major rap on the knuckles,” said analyst Richard Hunter at the Hargreaves Lansdown brokerage.