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Energy & Natural Resources

Global Home > Energy & Natural Resources

Weak Prices Hurt Asian Palm-Oil Producers' Earnings and Leverage

The nine palm-oil companies tracked by Fitch reported an average 26% rise in net debt/EBITDA in 2Q19, which resulted in a 92% yoy increase. We expect leverage at palm-oil producers to stay elevated throughout 2019, as prices are unlikely to recover significantly due to muted palm-oil demand and higher inventory from stronger 2H19 production.

Chinese NOCs to Meet 2019 Targets; 1H19 Credit Metrics Steady

The upstream production of PetroChina, Sinopec and CNOOC rose by low-to-mid single digits yoy in 1H19, largely within management's guidance. Natural-gas output growth improved markedly for PetroChina and Sinopec, by 9.7% and 7%, respectively, closely tracking domestic consumption growth (+10.8%).

China's Gas Demand Strong, Operators' Earnings to Rise in 2019

We expect their profit margins to narrow due to a bigger share of earnings from lower-margin gas sales, supported by coal-to-gas conversion, and moderating gas-connection margins, but their business profiles will improve as gas sales are more stable than connections.

China's National Pipeline Co Promotes Sector Liberalisation; NOCs' Credit Intact

The separation of transmission and product sales will allow private producers and customers to access the provincial and inter-provincial crude-oil and natural-gas pipeline network infrastructure that is largely monopolised by the NOCs.

Saudi Aramco Posts Strong Cash Flows, Boosting M&A Prospects

Saudi Aramco's strong cash flow generation and its net cash position could support further acquisitions. The company's growth strategy focuses on vertical integration and includes its recent acquisition of a 70% stake in SABIC and the negotiations to acquire a 20% stake in Reliance Industries' refining and petrochemicals business. 

PEMEX's 2019-2023 Plan Confirms Risk to Credit Profile

PEMEX's credit metrics will weaken if the company executes its recently announced business plan. PEMEX's long-term capex plan could lead to an average proved reserve replacement ratio of 50%, which when combined with the company's long-range production goals may significantly deplete reserves, leading to higher than expected leverage and cash burn.
 

Webinar

Fitch on Oil & Gas

Now Available On-Demand
 

Please join Dmitry Marinchenko, Senior Director and lead analyst on EMEA Oil & Gas, for a discussion on the credit impact of the latest OPEC+ decision. This webinar also covers Fitch’s views on aggregate oil demand, US shale’s role in the global supply dynamics, and recent developments in European natural gas.

Listen Now

Coal Power Pressured Despite Affordable Clean Energy Rule

The US Environmental Protection Agency's new Affordable Clean Energy rule has a limited near-term effect on public power issuers and will not change the long-term pressure on most public power utilities to reduce carbon dioxide (CO2) emissions.

rating action

Fitch Downgrades PEMEX to 'BB+' Following Sovereign Downgrade

PEMEX's Negative Outlook reflects the potential for further deterioration of the company's stand-alone credit profile to below 'ccc'. Although PEMEX has implemented some cost cutting measure and received moderate tax cuts from Mexico, the company continues to severely underinvest in its upstream business, which could lead to further production and reserves decline. 

Mexico's Latest Oil Tax Cuts Alone Are Insufficient for PEMEX

Friday's implementation of an additional tax reduction for PEMEX is insufficient to stabilize the company's credit quality as an isolated measure, but it is one more step in the right direction.

 

OPEC+ Has Capacity to Offset Iran Crude Supply Cuts

OPEC+ is likely to mitigate the decline in Iran's production due to US waivers ending. This will not necessarily mean an increase in the alliance's overall production and could be effectively achieved through ramping up output within existing quotas or redistribution of quotas. The alliance has adjusted its output to offset fluctuating global supply and demand since its formation in 2016. Crude price volatility is increasing in the short term, however.

Webinar

Latin America Mega Borrowers

Now Available On-Demand

 

Fitch Ratings is hosting a webcast on the largest Emerging Market borrowers in Latin America. Senior analysts from the Latin America Corporate Ratings Group will provide forecast snapshots on the following mid to low investment-grade issuers with the highest adjusted debt: America Movil, Ecopetrol, Petrobras and Suzano. 

 

Speakers:
Daniel Kastholm - Managing Director and Regional Group Head, Latin America Corporate Ratings (moderator)
Lucas Aristizabal - Senior Director and Head of Latin America Energy 
Fernanda Rezende - Senior Director, Latin America Corporate Ratings (Fitch Brazil)
Sul Ahmad - Associate Director, Latin America Corporate Ratings 

 

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Rising US Energy Defaults Not Reflective of Broad-Based Risk

Speculative-grade issuers that struggled during the 2014-2016 oil price collapse and failed to fully address structural issues are running out of options, even as oil prices rise. However, operators with high-quality assets, efficient low-cost operations and conservative balance sheets are exhibiting growth and generating positive FCF, which supports credit profiles. 

Aramco's SABIC Deal Echoes Oil Majors' Vertical Integration

Saudi Aramco's acquisition of SABIC (both rated A+/Stable) echoes efforts made by global oil majors and national oil companies to integrate further into downstream and petrochemicals. Refining and petrochemical margins are countercyclical to oil prices and represent a hedge against low oil prices.

Rating Action

Fitch Publishes Saudi Aramco's 'A+' First-Time IDR, Outlook Stable

Saudi Aramco is the world's largest oil producer and the national oil company of Saudi Arabia (A+/Stable). Its standalone profile corresponds to a rating of 'AA+', which sits at the upper boundary of the Fitch rating spectrum for oil and gas companies, and reflects the company's high production, vast reserves, low production costs and very conservative financial profile.

rating action

CITGO Petroleum and CITGO Holdco on RWN

The Rating Watch Negative reflects heightened refinancing risk for the company related to US sanctions against Venezuela. Refinancing risk applies to both Opco's $900 million secured revolver, which expires in July of this year, as well as Holdco's $1.875 billion notes, which are due somewhat later in February 2020

Why Forum

Why “Perverse Incentives” Are Hurting the Solar Market

Infrastructure analyst Cherian George looks at changes in the solar panel market. Growth in residential solar panel installations has sputtered in recent years and an eerie parallel from a decade ago — namely elements of the mortgage crisis — may be part of the reason.

Webcast

Fitch Ratings: An Overview on PEMEX

NOW Available On-Demand

Fitch Ratings hosted a webcast with Lucas Aristizabal, the primary analyst on PEMEX, and Charles Seville, Co-Head of the Americas Sovereign Ratings. Topics of discussion include an overview on PEMEX in light of its recent downgrade and other key rating drivers. Questions from the audience were also addressed.

Webcast

What Investors Want to Know - Utilities’ Renewables

Fitch Ratings senior analysts discussed the most frequently raised questions from investors in the European Utilities Renewables sector.

  • Fitch’s view on the changing business environment for renewables and implications for credit profiles                    
  • A discussion around the renewables competitive landscape
  • Portfolio analysis for some large European Utilities, featuring: Enel, Iberdrola, EDP, the new RWE and Orsted

Listen to Webcast On Demand

OPEC+ Supply Controls Are Key for Medium-Term Oil Prices

Changes to Fitch Ratings oil and gas price assumptions are modest, but we believe that supply controls will support medium-term oil prices in the range of USD60-USD65 a barrel for Brent crude. In the longer term, we continue to expect prices to fall below USD60/bbl driven by the falls to marginal producers' full-cycle costs.

US Midstream Sector Ramping Up on Hope of Higher Oil Exports

Record crude production in the US and the prospect of increased exports is prompting midstream energy companies to build pipeline, storage and export terminals that accommodate very large crude carriers.

Special Report

U.S. and Canadian E&P Transactions

Activity continues to slow and Permian volumes and valuations remain robust according to a Fitch Ratings report. View the new interactive Oil & Gas Valuation Heatmap for transaction comparison and deals by county. Compare yearly data and read the full report

Contacts

BUSINESS ENQUIRIES

Jill Zelter

Global Group Head & North America

BUSINESS ENQUIRIES

Anjali Sharma

Europe, Middle East, Africa

BUSINESS ENQUIRIES

Kathleen Fuentes Holtzman

Latin America

BUSINESS ENQUIRIES

Sing Chan Ng

Asia-Pacific

Banker ENQUIRIES

Matthew de Mendonca

North America

Banker ENQUIRIES

Sean Costello

Europe, Middle East, Africa

Investor ENQUIRIES

Aymeric Poizot

Global Group Head & Europe, Middle East, Africa

Investor ENQUIRIES

Ian Rasmussen

North America

Investor ENQUIRIES

Frank Laurents

Latin America

Investor ENQUIRIES

Helen Wong

Asia-Pacific

ANALYTICAL ENQUIRIES

Shalini Mahajan

North America

ANALYTICAL ENQUIRIES

Lucas Aristizabal

Latin America

ANALYTICAL ENQUIRIES

Peter Archbold

Europe, Middle East, Africa

ANALYTICAL ENQUIRIES

Buddhika Piyasena

Asia-Pacific

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