Fitch revises BP's outlook to 'stable', affirms at 'A' rating

Fitch Ratings has revised its outlook on oil giant BP’s long-term Issuer Default Rating (IDR) to ‘Stable’ from ‘Positive’ and affirmed the IDR at 'A'.

In a note to clients on Thursday, the ratings agency said the revision reflects its expectation that amid weak oil prices BP's financial leverage will be higher than previously assumed.

“We expect BP's funds from operations (FFO) net leverage to peak at around 3x in 2016 and to settle between 2.5x and 3x over 2017-19, in line with our guidance for the outlook stabilisation. We lowered our price deck in January 2016 and forecast Brent to average $45 per barrel in 2016, gradually recovering to $60 per bbl by 2018.”

The affirmation of BP's 'A' IDR reflects the company's strong business profile with diversified upstream and downstream operations, sound liquidity and the removal of uncertainty over Deepwater Horizon rig explosion and subsequent Gulf of Mexico oil spill-related claims, Fitch added.

BP's credit profile “significantly improved” in July 2015, according to the agency, following a preliminary agreement with the US Justice Department and five US states to settle the claims for $18.7bn, payable over 18 years.