The Deepwater Horizon incident has significantly impacted the offshore drilling industry, particularly BP. The company faced significant fines, damage claims, and legal bills, forcing it to sell a significant part of its assets to cover the costs. The value of the company’s bonds went down amid the crisis resulting in the re-purchasing of 2010 gas pre-paid bonds (Annual report and Form 20-F 2012 226). This trend contradicted the pre-incident prospects (Annual report and Accounts 2008 156). However, the company managed to keep its financial capabilities mainly by restructuring and selling assets and capitalizing on high crude oil prices. Current oil and gas price dynamics are favorable for BP, as evident by the company’s stable Fitch and Moody’s rating (Fitch Affirms BP at “A”; Outlook Stable; Moody’s Affirms BP’s Rating and Maintains Stable Outlook). The company raising nearly $12 billion in hybrid bond issue in 2020 has shown positive prospects for the company’s future capacity to issue bonds, especially with the continuing diversification towards renewable energy. Bond offering in this condition would be favorable for BP.
BP does not show plans to issue or retire any long-term debt in the immediate future. The company’s long-term debt is declining, dropping from a peak of $64.5 billion in 2020 to $42.6 billion as of September 2022 (BP Long Term Debt 2010-2022). Recent successful bond issue and current high prices for oil and gas present an opportunity for the company’s growth and continuing bond offering. The GAAP disclosure requirements include full disclosure of long- and short-term debt conditions that the company could decide not to reveal to keep its ratings stable (US GAAP Disclosure List). However, the current prospects for the company are highly favorable and would mitigate possible negative effects on BP’s credit rating and bonds.
The company still faces multiple court cases and governmental fines after the Deepwater Horizon incident. Failure to follow GAAP would set a dangerous precedent for other industry giants in case of similar events, present a potential financial risk for investors, and impact the company’s credibility. The United States Securities and Exchange Commission could also issue steep fines. These factors combined could mitigate or reverse any potential financial gains the company would receive from investors.
Works Cited
“Annual report and Accounts 2008.” BP, Web.
“Annual report and Form 20-F 2012“. BP, Web.
“Fitch Affirms BP at “A”; Outlook Stable.” Fitch Ratings, Web.
“Moody’s Affirms BP’s Rating and Maintains Stable Outlook.” Moody’s, Web.
“BP Long Term Debt 2010-2022.” Macrotrends, Web.
“US GAAP Disclosure List.” Ready Ratios, Web.