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Moody's lifts BP ratings as impact of Deepwater Horizon fines becomes clearer

Moody's raised BP plc's ratings to reflect "reduced uncertainty" surrounding the financial impact of the company's payments for the Deepwater Horizon disaster, improved credit metrics and strong operating performance.

The rating agency upgraded BP's issuer rating and its subsidiaries' long-term debt ratings to A1 from A2, with a positive outlook, according to a June 8 news release. Moody's also upgraded BP Corp. North America Inc.'s issuer rating to A2 from A3.

BP provided clarity on the future cash flow impact of the liabilities related to the 2010 Deepwater Horizon explosion and oil leak in the Gulf of Mexico, for which the company will continue to pay fines until 2032, Moody's said. However, expected performance will continue to lag behind its peers because of the liabilities, which amount to about $16.5 billion.

Moody's still expects BP's credit metrics to improve in 2017 as it makes up for the liabilities with a program of divestitures totaling $4.5 billion to $5.5 billion in 2017 and $2 billion to $3 billion in 2018, which is expected to cut the remaining liabilities by about 45% to $9 billion.

BP also showed strong operating performance given the volatile price environment, with earnings mostly driven by upstream operations and attributed to higher production volumes and higher margins, Moody's said.