Sat, Jan 23, 2016 - Page 13 News List

Moody’s eyes downgrades for 120 oil and gas firms


Credit evaluator Moody’s Investors Service yesterday said it has placed the ratings of 120 oil and gas firms worldwide under review for possible downgrades due to plunging crude prices.

“These reviews reflect a mix of declining prices that are near multiyear lows, weakening demand and a prolonged period of oversupply that will continue to significantly stress the credit profiles of companies in the oil and gas sector,” the firm said in a statement.

“The actions also reflect Moody’s effort to recalibrate the ratings in the oil and gas portfolios to align with the fundamental shifts in credit conditions,” it added.

About half of the firms under review come from the US.

“Oil prices have deteriorated substantially in the past few weeks and have reached nominal price lows not seen in more than a decade,” Moody’s said.

“We see a substantial risk that prices may recover much more slowly over the medium term than many companies expect, as well as a risk that prices might fall further,” it added.

“Even under a scenario with a modest recovery from current prices, producing companies and the drillers and service companies that support them will experience rising financial stress with much lower cash flows,” Moody’s said.

Crude oil prices have been hammered over the past three weeks, falling about 75 percent in 18 months on a supply glut, weak demand, overproduction and a slowing global economy.

Adding to downside pressure is the return of Iranian crude into the market after the lifting of Western sanctions, offsetting any output cuts from other countries.

Earlier in the week, US benchmark West Texas Intermediate sank to as low as US$26.19 and Brent tumbled to less than US$28 — both at more than 12-year lows.

The ratings firm reduced its estimates for both West Texas Intermediate and Brent to US$33 per barrel for this year, cutting the US benchmark forecast by US$7 and Brent by US$10, citing increased supplies from OPEC, as well as moderate consumption growth.

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