Fitch cuts BP rating on huge oil spill cost

Fitch Ratings today slashed the credit rating of British energy major BP Plc for the second time this month, citing increased near-term expenses related to the devastating oil spill in the Gulf of Mexico.

The rating on BP, which is grappling with rising costs to tackle the oil spill for the past two months and more, was earlier cut by Fitch on June 3. The global rating agency said it has downgraded the "long-term issuer default rating and senior unsecured rating to 'BBB' from 'AA', respectively", indicating less confidence in BP's ability to payback debts.

According to the agency, the upward revision of the amount of oil leaking everyday and the US government demand for setting aside billions of dollars for the spill victims, would have a "direct bearing on BP's fundamental financial flexibility".

"The scale of today's rating action has been partly driven by the increased risk that the balance between long-term and near-term cost payments may now be skewed much more heavily towards the near-term than previously anticipated," Fitch said in a statement.

Earlier this month, Fitch had slashed BP's rating to AA from AA+.

Going by the Fitch estimate, the immediate clean-up cost and claim settlements is expected to be in the range of $3 to 6 billion. Yesterday, BP said the oil spill had so far resulted in expenses to the tune of $1.6 billion apart from the company seeing over 51,000 claims.

The oil giant has also warned that it is too early to quantify other potential costs and liabilities associated with the incident.

The spill was caused by an explosion on the Deepwater Horizon rig in April and thousands of barrels of oil are estimated to be leaking into the Gulf of Mexico every day.