The trend change reflects DBRS Morningstar's expectation that the Company's key credit metrics will improve substantially through 2022 to support the ratings. The expected improvement is driven by a recovery in crude oil prices and
KEY RATING CONSIDERATIONS
The rating confirmation reflects the Company's resilient business profile underpinned by its (1) well-diversified, vertically integrated operations; (2) large size and scale with a significant production base; (3) low-cost structure compared with peers; and (4) strong liquidity position enabling it to withstand market volatility. Key factors constraining the rating include
The challenging environment caused by the Coronavirus Disease (COVID-19) resulted in a steep decline in the Company's earnings and cash flow. In response,
DBRS Morningstar expects the Company to generate FCF surpluses in 2021 and 2022 based on DBRS Morningstar's base-case commodity price assumptions (see DBRS Morningstar's press release 'DBRS Morningstar Updates Oil and Natural Gas Price Forecasts: Coronavirus Vaccinations and OPEC+ Production Cuts Underpin Speedy Oil Price Recovery' dated
Going forward, the Company expects to allocate 60% of its FCF surpluses to share buybacks with the balance directed toward deleveraging. Consequently, DBRS Morningstar expects
DBRS Morningstar notes the Company's new strategy to reposition the business away from oil and gas (O&G) activities to become a net-zero carbon company by 2050.
Nonetheless, the O&G business will continue to be the predominant driver of earnings and cash flow over the next four years.
While the new strategy does address the challenge associated with decarbonization, it also entails significant capex (
RATING DRIVERS
ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.
Notes:
All figures are in
The principal methodology is Rating Companies in the Oil and Gas and
https://www.dbrsmorningstar.com/research/369165/dbrs-morningstar-criteria-preferred-share-and-hybrid-security-criteria-forcorporate-issuers and DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (
The primary sources of information used for this rating include publicly available information, namely Annual Reports & Form 20-F, quarterly performance reports, and other publicly available management presentations. DBRS Morningstar considers the information available to it for the purposes of providing this rating to be of satisfactory quality.
With respect to
With Rated Entity or Related Third-Party Participation: NO
With Access to Internal Documents: NO
With Access to Management: NO
DBRS Morningstar does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.
Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.
For further information on DBRS Morningstar historical default rates published by the
The sensitivity analysis of the relevant key rating assumptions can be found at: https://www.dbrsmorningstar.com/research/380696/bp-plc-sensitivity-analysis
This rating is endorsed by
Lead Analyst:
Rating Committee Chair:
Initial Rating Date:
Last Rating Date:
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Rating Companies in the Oil and Gas and
https://www.dbrsmorningstar.com/research/365808/rating-companies-in-the-oil-and-gas-and-oilfield-services-industries.
DBRS Morningstar Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers (2 November 2020),
https://www.dbrsmorningstar.com/research/365808/rating-companies-in-the-oil-and-gas-and-oilfield-services-industries
DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (
Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on
www.dbrsmorningstar.com.
Ratings
Date Issued Debt Rated Action Rating Trend Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
28-Jun-21 Issuer Rating Trend Change A StbUK
E
28-Jun-21 Issuer Rating Confirmed A NegUK
E
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