Fitch: Waning Market Sentiment for BP Plc Reflected in CDS
NEW YORK -- April 3, 2014
Spreads on five-year credit default swaps (CDS) on BP Plc widened by 33% in
March, underperforming peers and Fitch's European Oil and Gas CDS Index, which
widened just 10% during the same period, according to Fitch Solutions. Growing
market concern reflected in the wider BP CDS is likely driven by its
investment in Russia's largely state-owned OAO Rosneft amid potential
sanctions arising from the Ukraine conflict.
CDS liquidity for the UK's flagship oil and gas producer has increased
slightly over the past few trading sessions, from the 26th regional percentile
on March 25 to the 19th percentile as of March 31. Increased CDS liquidity for
an issuer typically signals increased market uncertainty over future pricing
CDS of BP peers outperformed their competitor last month, with Eni SpA CDS
tighter by 6%; Total SA CDS wider by 7%, and Royal Dutch Shell plc CDS wider
by just 6%.
The suggested negative shift in market sentiment for BP highlighted by CDS
levels does not signal a rating change. Fitch continues to believe that the
direction of BP's credit rating ('A' IDR) heavily depends on the outcome of
its legal proceedings, as large legal uncertainties remain. On a broader
basis, revenue growth is slowing across the EMEA oil and gas sector from a
combination of stable prices and declining production volumes. Nearly all the
western European oil companies rated by Fitch reported a year-on-year decline
in upstream output of between 3% and 5% in 2013.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit
market commentary page. The original article, which may include hyperlinks to
companies and current ratings, can be accessed at www.fitchratings.com. All
opinions expressed are those of Fitch Ratings.
Diana Allmendinger, +1 212-908-0848
Maxim Edelson, +7-495 956-9986
Kellie Geressy-Nilsen, +1 212-908-9123
Sandro Scenga, +1 212-908-0278
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