"The ratings on 40% of the oil and gas companies we rate in Asia-Pacific and 60% of the stand-alone credit profiles will face downward pressure if oil prices fall 10% below US$50 per barrel without any signs of recovery," said Standard & Poor's credit analyst Mehul Sukkawala.
"The ratings on 40% of the oil and gas companies we rate in Asia-Pacific and 60% of the stand-alone credit profiles will face downward pressure if oil prices fall 10% below US$50 per barrel without any signs of recovery," said Standard & Poor's credit analyst Mehul Sukkawala. "Overall, the ratings on Chinese state-owned enterprises and Australian companies are the most vulnerable, while the stand-alone credit profiles of the government-owned companies in countries such as Indonesia and Korea are at the greatest risk."
Oil and gas companies in Asia-Pacific are still better off than those in other regions where the energy sector has been a significant contributor to higher default rates. This is mainly because the Asia-Pacific energy companies that Standard & Poor's rates are generally large, have good financial positions despite the low oil prices, and benefit from close strategic relationships with their respective sovereigns.
Standard & Poor's current Brent crude oil price assumptions build in a gradual improvement. We forecast oil prices at US$55 in 2016, US$65 in 2017, and US$70 in 2018 and beyond.
"If the oil price outlook worsens, Asia-Pacific oil and gas companies will need to reassess projects, weigh returns, prioritize investments, and review shareholder distributions," said Mr. Sukkawala. "Defending creditworthiness in a tough environment will call for some difficult decision-making, particularly at the government-owned companies that dominate the sector."
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