Wednesday, October 19, 2011

S&P: A-P oil & gas firms can withstand current price slump

KUALA LUMPUR: The recent downturn in crude prices may be discomforting for Asia-Pacific oil and gas companies, but it's unlikely to affect credit ratings, said Standard & Poor's Ratings Services.

In a report entitled 'Asia-Pacific Oil And Gas Companies Can Endure The Current Price Slump' released on Wednesday, Oct 19, S&P analyst Lawrence Lu said the agency's ratings had already factored in conservative assumptions for oil and gas prices.

'Therefore, we haven't had to take any rating actions on exploration and production companies in this region due to the recent price slump," said Lu.

The reported stated that many companies achieved solid earnings in the first half of this year, due to unexpectedly high oil prices.

It said this had created a buffer in the ratings to offset the likelihood of lower operating cash flows over the next 12 months if global economic growth remained uncertain and oil demand weakened.

Lu said the ratings on companies with negative outlooks could come under pressure if oil prices remained weak for a sustained period.

'That's because the companies have a reduced ability to internally fund a portion of their investments, and this may increase their reliance on debt.

"Further, weaker oil prices may undermine the economics of new projects, in particular non-conventional projects, such as oil sand and shale gas investments,' said Lu.


No comments:

Post a Comment