BP hit by ratings cut, vows to protect shores from oil spill
BP was hit on Thursday with a ratings downgrade over the worst oil spill in US history and admitted it was ill-prepared, while promising to pay for costly barriers to protect fragile wetlands.
International ratings agency Fitch said it had cut BP's long-term issuer default rating and senior unsecured rating from "AA+" to "AA", and placed them on negative watch, citing risks from the huge Gulf of Mexico oil spill.
"The downgrade of BP's ratings reflects Fitch's opinion that risks to both BP's business and financial profile continue to increase following the Deepwater Horizon accident in the US Gulf of Mexico," Fitch said.
"The company has so far repeatedly failed to stop the resultant oil leak and has instead reverted to containment methods that are yet to be fully implemented and are subject to potential weather related disruption."
The dire news came after BP had earlier pledged 360 million dollars for the construction of six sand barriers to help keep oil from reaching Louisiana's fragile wetlands, pushing its total costs to 1.35 billion dollars.
BP has so far failed in all its attempts to fix the leak, triggering mounting anger in Washington as oil washes up on Gulf shores.
Fitch forecasts that costs could reach between 2.0-3.0 billion dollars this year, depending on how much oil hits the US shoreline.
BP chief executive Tony Hayward admitted Thursday that the oil giant had not been prepared for a deep-water leak.
"What is undoubtedly true is that we did not have the tools you would want in your tool-kit," Hayward told the Financial Times newspaper.
Although he said BP had been "very successful" in keeping oil away from the coast, he accepted it was "an entirely fair criticism" to say the firm had not been fully prepared for a deep-water oil leak.
The oil spill began with an April 20 explosion that ripped through the Deepwater Horizon rig, 50 miles (80 kilometers) off the Louisiana coast, killing 11 workers.
The slick closed in on Florida Thursday as US officials shut down fishing in a vast swathe of the region's waters and efforts to contain the leak hit another snag.
After a string of failed attempts to cap the leak, BP is battling to contain the spill with robotic submarines working in cold waters a mile down (1,600 meters) on the sea bed.
Efforts were set back Wednesday when the saw being used to cut through the fractured riser pipe became stuck. The saw was later freed, but it was unclear whether it could be used again.
Meanwhile, the group said Thursday it will pay for the construction of six sand barriers to help keep oil from reaching fragile wetlands, supporting the US government's Louisiana barrier islands proposal.
US officials had ordered BP on Wednesday to pay for five more sand barriers in the Mississippi Delta to help minimize potential damage to vulnerable shorelines.
"BP is committed to implementing the most effective measures to protect the coastline of Louisiana and reduce the impact of the oil and gas spill in the Gulf of Mexico," said Hayward in a company statement on Thursday.
"The federal government and the state of Louisiana have agreed that the barrier islands construction is an effective response to the spill, and we look forward to working with them on this project."
More than 125 miles (200 kilometers) of Louisiana coast have been contaminated by the oil spill, triggering long-term fears for the region's already endangered wildlife.
Fitch also warned Thursday that an official US investigation was another negative factor for BP, while it could still face more downgrades.
"BP is still facing substantial additional risks in relation to the oil spill," it said.
"Factors ... include the actual oil well flow rate permanently increasing; the failure of the relief well currently being drilled by BP to completely arrest the oil flow from the leaking well in a timely fashion; and clean-up costs exceeding Fitch's worst case expectations of around 5.0 billion dollars in any one year."
© 2010 AFP