S&P Downgrades Junk-Level Ratings on 25 Oil-and-Gas Producers
February 09 2016 - 4:30PM
Dow Jones News
Standard & Poor's Ratings Services downgraded the
junk-territory ratings on 25 oil-and-gas companies on expectations
that credit quality will deteriorate owing to low commodities
prices and reduced production.
The credit-ratings firm, which also affirmed the ratings of an
additional 20 speculative-grade exploration-and-production
companies, said the ratings actions followed a revision of
S&P's price assumptions for crude and natural-gas.
Whiting Petroleum Corp. and Oasis Petroleum Inc. were among the
companies to receive downgrades. Their shares fell 9.9% and 8.2%,
respectively, in recent trading.
Since the start of the year, all three of the world's top
ratings firms have warned that oil company credit standings are at
risk.
Last week S&P had cut the ratings of 10 U.S. oil and gas
exploration and production companies, including investment-grade
Chevron Corp., citing the sharp drop in crude oil prices.
Meanwhile, Exxon Mobil Corp.'s triple-A corporate rating was placed
on watch for a possible downgrade.
The ratings actions Tuesday included a number of multinotch
downgrades and the outlooks for many of the companies' ratings were
negative, in a sign that further cuts are possible.
S&P said the latest ratings actions also reflected liquidity
risks, particularly those related to the redeterminations of the
companies' revolving credit facility borrowing bases coming in
April. S&P said it expects that the borrowing bases for most of
the energy firms will decline as the result of hedges rolling off
this year, a lack of reserve replacements resulting from reduced
production in 2015 and futures prices that are below many bank
borrowing base prices.
S&P estimated that the energy company's borrowing bases, on
average, will decline between 20% and 30% at the next
resetting.
The company said the ratings actions also reflect the
possibility of capital restructurings or distressed-bond exchanges
given current bond prices.
Write to Tess Stynes at tess.stynes@wsj.com
(END) Dow Jones Newswires
February 09, 2016 16:15 ET (21:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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