Fitch downgrades BP ... again

By Aaron Smith, CNNMoney.com staff writer


NEW YORK (CNNMoney.com) -- Fitch Ratings downgraded BP for a second time this month to just above junk status, as the news just keeps getting worse for the oil giant.

Fitch said it lowered its senior unsecured rating to BBB from AA on Tuesday, in response to increasing estimates of spilled oil in the Gulf of Mexico and increasing pressure on the oil giant to establish an escrow account to pay for damages.

This action comes less than two weeks after Fitch downgraded BP to AA from AA-plus and placed the company on "watch negative."

The rating agency said there were two main reasons for the most recent downgrade.

The first reason, said Fitch, is "the indication late last week from U.S. government scientists of a significantly higher spill rate that previously announced by all parties," which could "materially increase BP's exposure to Justice Department fines."

Second, Fitch cited "the significant step-up in action from the U.S. government surrounding calls for pre-emptive escrowing of damage claims."

The rating agency said it has increased its estimates for clean-up and claim settlements to range of $3 billion to $6 billion, compared to its June 3 estimate of $2 billion to $3 billion.

Fitch also mentioned that U.S. government scientists might increase their estimates on the flow rate of the oil spill in the Gulf. Fitch based its estimates on a current rate of 25,000 barrels per day, which is at the low end of the government's scale. This is at the low end of government estimates, of up to 40,000 barrels per day. Fitch said that BP is capturing about 15,000 barrels per day.

The rating agency said the spill could result in civil fines ranging from $2 billion to $8 billion. Fitch said that BP also faces one-off costs related to the cleanup of $1.4 billion, but that figure could rise.

However, the rating still indicates that Fitch finds BP to have little risk of default and the "the capacity for payment of finical commitments is considered strong."

BP spokeswoman Sheila Williams declined to comment.

The spill has been ongoing since April 20, when the Deepwater Horizon oil rig exploded and sank off the coast of Louisiana, killing 11 workers.

On Monday, U.S. lawmakers, led by Senate majority leader Harry Reid, sent BP Chief Executive Tony Hayward a letter to set up an escrow account for $20 billion to pay damage claims.

Fitch announced its downgrade as BP executives prepared to appear before congressional committees on Tuesday and Wednesday to testify about the spill.

BP's stock plunged 10% on Monday, as executives held a board meeting. The company is weighing whether to issue its $2.4 billion second quarter dividend in August.

President Obama is visiting the Gulf region this week and plans to address the nation on Tuesday regarding the oil spill. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,804.80 26.65 0.15%
Nasdaq 4,765.38 16.98 0.36%
S&P 500 2,070.65 9.42 0.46%
Treasuries 2.18 -0.03 -1.27%
Data as of 10:19am ET
Company Price Change % Change
Bank of America Corp... 17.62 0.09 0.51%
Apple Inc 111.78 -0.87 -0.77%
General Electric Co 25.62 0.48 1.91%
Intel Corp 36.37 -0.65 -1.76%
Microsoft Corp 47.66 0.14 0.29%
Data as of Dec 19

Sections

New York Magazine reporter Jessica Pressler, who has been caught up in controversy this past week, will not be moving on to a new job at Bloomberg News. More

Investors beware: These 5 global crises are likely to rattle the stock market and world economy. More

Forums in dark corners of the web sell the kinds of hacks that befell Sony. More

Unilever sued Hampton Creek over its egg-free mayonnaise spread Just Mayo. But the company behind Best Foods and Hellman's mayonnaise has now dropped the lawsuit. More

The income of the top 1% jumped significantly in 2012, far outpacing inflation. Not only did this group make a larger share of the country's income, their share of total taxes also jumped from 35% to 38%. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.