BP PLC

The stable outlook reflects our view that BP's credit metrics will continue to improve over the coming quarters, with FFO to debt exceeding 30% in 2021, and remaining on a trend toward 40% thereafter. We expect gradual deleveraging will be possible thanks to supportive market conditions driving organic operating cash flow, along with BP's financial policy of strengthening the balance sheet over time. We could lower the rating on BP if FFO to debt were to remain consistently below 35%, although we do not anticipate this in the next 12 months. This could be the case if BP modified its financial policy with more of an emphasis on shareholder distributions, or if its supportive actions were not timely during periods

...BP's credit metrics will likely be at or above the minimum rating threshold in 2021, but will rebound further in 2022. Given our oil price assumption of $75 per barrel (/bbl) for the remainder of 2021 and $65/bbl in 2022, we forecast funds from operations (FFO) to debt of about 30% or higher in 2020, which is below the multiyear threshold of 35% for the rating. However, we expect FFO to debt to continue rebounding in 2022 to at least 35%, on the back of higher oil prices and lower debt. BP financial framework provides visibility about uses of cash and balance sheet resilience. During the first nine months of 2021, BP demonstrated adherence to its financial framework by strengthening the balance sheet. It reduced reported net debt to $32 billion on Sept. 30, 2021, from about $39 billion on Dec. 31, 2020. Under BP's financial policy, about 40% of surplus cash flow (as defined by BP), is directed to net debt reduction. Importantly, the dividend has been reset at a lower level and protecting...

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