BP plc (BP) has taken another step toward meeting its $30 billion spill-related obligation. The U.K. oil major has decided to raise cash by using other sources of capital. It plans to sell $3.5 billion debt for the first time since the oil spill on April 20.
Following a prolonged sluggishness, the company recently got back an investment grade credit rating (Baa3 by Moody’s Investors Service, the lowest step of investment-grade), which compelled it to raise money through the debt market.
The sale will be in two parts. One includes $2 billion of notes due October 1, 2015, priced to yield 195 basis points over comparable U.S. Treasuries and the other is a sale of $1.5 billion of notes due October 1, 2020, priced to yield 210 basis points more than Treasuries.
The financially troubled U.K. major plans to dispose of $30 billion of assets over this year and next. It recently sold $7 billion worth of upstream assets to Apache Corporation (APA). The company also intends to sell its oil and gas fields in Vietnam and Pakistan for about $2-$4 billion.
BP has plugged the Macondo well on September 19. Till September 17, the company incurred $9.5 billion to seal the well. Other costs that include fines and penalties, longer-term remediation, compensation and litigation costs, are likely to be stretched over a number of years.
We believe that ongoing strategic initiatives allow BP to regain its pre-spill image, which help the company to further pursue long-term growth projects with an emphasis on high-margin oil.
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