E&P oil firms in a downcycle, says Moody's
MOODY'S Investors Service says the fall in crude oil prices in the first quarter will be credit negative for upstream exploration and production oil companies globally.
“We expect Asian upstream oil and gas companies to post weaker results for the quarter ending 31 March 2015,” said Vikas Halan, Moody’s vice president and senior credit officer.
“Companies with strong liquidity, exposure to natural gas, and flexibility to reduce production costs will be best positioned to weather this downcycle.
“As Asian upstream producers cut or defer exploration activities to preserve cash, we also anticipate that oilfield services companies will see earnings come under pressure.”
Halan was speaking on the release of the latest edition of Moody’s Asia Oil & Gas Quarterly, a publication focusing on credit themes in Asia’s oil and gas industry.
On the downstream segment, Moody’s expects regional refiners to benefit from improving margins and refined product spreads in the first quarter.
However, the regional refining margin will remain weak in 2015, but largely flat against 2014 levels of around US$6 per barrel (Bt195), as capacity additions continue to outpace demand growth.
Moody’s publication also |notes that the natural gas price reduction in India from April 1 is credit negative for upstream producers Oil and Natural Gas Corporation (Baa2 stable) and Oil India (Baa2 stable) because it will lower their revenue and cash flows, which are already under pressure from low oil prices.
