BP PLC

The stable outlook reflects our projection of a gradual improvement of BP's cash-flow-based metrics toward levels commensurate with our 'A-' rating, including FFO to debt consistently above 30%. The decline in oil prices and BP's need to use a significant amount of cash to make payments related to the Macondo oil spill weighed on the company's metrics in 2015-2017. We assume there will be no further material cash outlays related to the incident. We forecast BP's FFO to debt will improve to 30%-35% in 2018-2019, supported by improved market conditions and production growth. Further deleveraging potential remains in the hands of management, but we assume that BP, like some of its peers, will increase shareholder distributions, especially if oil prices

...BP should achieve strong cash flow in the second half of 2018 and in 2019, thanks to higher average oil prices and one of the strongest production growth rates among the majors. S&P Global Ratings believes BP is fully able to deliver on its impressive 5% per annum production guidance and could sustain it even beyond 2020, in view of its portfolio of new projects. Importantly, cash breakeven levels should continue declining from an estimated $45 at the end of 2018, supporting solid upstream cash flows even if oil prices gradually decline in 2019-2020. Credit measures could rebound in 2019-2020, but only modestly, owing to acquisitions and increased shareholder remuneration. BP is set to generate meaningful free operating cash flow even under an assumed oil price decline in 2019-2020. This is because we don't believe BP will increase capital expenditure (capex) beyond its guidance of $15 billion-$17 billion. However, if market conditions remain favorable, we assume not all extra cash flows...

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