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(Alliance News) - Moody's Investors Service late Tuesday downgraded to A2 from A1 the issuer rating of oil & gas company BP PLC.
The outlook on all ratings was changed to stable from negative.
The ratings agency said rating downgrade to A2 with stable outlook reflects its view that BP's balance sheet suffered materially from the 2020 industry downturn which was driven by weak oil & gas prices and demand dislocation caused by the global pandemic.
Despite the decision to downgrade, the A2 rating also incorporates the rating agency's assessment that BP's updated strategy, the decisions to target lower net debt and to rebase the dividend should enable the company to balance different priorities including restoring its strong financial profile, continued shareholder remuneration, ongoing investments into its core oil and gas operations and rising investment need for its low-carbon operations.
"The downgrade of BP's rating to A2 reflects our expectation that BP would struggle to meet our quantitative requirements for the previous A1 rating under mid-cycle conditions. Nevertheless, we believe that BP's financial profile will recover from the 2020 downturn over the next 12-18 months supported by improving market conditions and BP's measures to protect its cash flow generation and balance sheet initiated in 2020, thereby positioning it solidly in the A2 rating," said Sven Reinke, a Moody' senior vice president.
BP shares closed 2.0% higher in London on Wednesday at 301.55 pence each.
By Evelina Grecenko; evelinagrecenko@alliancenews.com
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