Moody's concludes reviews of six South and Southeast Asian national oil companies
Thursday, March 17 2016 - 11:44 AM WIB
Moody's confirmed the ratings of all six companies, namely: 1) Petroliam Nasional Berhad (PETRONAS); 2) Pertamina (Persero) (P.T.); 3) Oil and Natural Gas Corporation Ltd. (ONGC); 4) Oil India Limited (OIL); 5) PTT Exploration & Production Public Co. Ltd. (PTTEP); and 6) PTT Public Company Limited (PTT). A list of each company's rating actions is included below.
These actions conclude the rating reviews started on 22 January 2016.
Oil prices have dropped substantially, reflecting continued oversupply in the global oil markets, very high inventory levels and additional Iranian oil exports coming on line. Moody's lowered its oil price estimates on 21 January 2016 and expects a slow recovery for oil prices over the next several years.
The drop in oil prices and weak natural gas prices has caused a fundamental change in the energy industry, and the sector's ability to generate cash flow has fallen substantially. Moody's believes this situation will persist over several years. As a result, Moody's is recalibrating the ratings of many energy companies to reflect this industry shift.
The drop in energy prices and corresponding capital market concerns will also raise financing costs and increase refinancing risks for exploration and production companies.
However, the impact of the drop in oil prices and low natural gas prices will vary substantially from issuer to issuer depending on their production mix between oil and natural gas, the extent of contractual protection in the selling price of natural gas, the ability to reduce lifting cost and operating expenditure, the flexibility to reduce capital expenditure without affecting production levels, reserve replenishment needs and the expected deterioration of the companies' financial profiles relative to its ratings.
The NOCs in South and Southeast Asia went into the downturn with relatively low leverage and continue to maintain strong liquidity levels and access to the capital markets. Despite Moody's expectation of a weakening in the credit metrics for these companies, they will remain appropriately positioned for their ratings. Consequently, Moody's confirmed the ratings for all six companies.
However, despite the conclusion of Moody's reviews, the NOCs' ratings could come under pressure if oil prices fall more sharply than Moody's expects and the companies cannot reduce their capex and dividends correspondingly. The ratings could also come under further pressure if the companies pursue a more aggressive ? either organic or inorganic ? growth strategy, and/or higher shareholder returns. (ends)