KUALA LUMPUR (Bernama) – Major integrated oil companies will fare better despite a challenging year for the oil and gas industry based on the stubbornly low oil prices, says Moody’s Investors Service.
In a report, Moody’s said the companies had been more measured in their response to falling oil prices, typically making investment decisions on assumption of oil prices of between $50 and $60 a barrel since projects could take years to complete.
“Nevertheless, ExxonMobil, Royal Dutch Shell and Total have announced spending reductions, while cuts at others, including Chevron and BP, look likely,” it said.
A spending cut of over 25 per cent would pressure midstream sector operators to maintain earnings before interest, taxes, depreciation and amortisation growth at current levels of 12-15 per cent, it said.
However, it said, a number of exploration and production (E&P) companies had already signalled spending cuts of 25 per cent or greater.
“Among the players, E&P companies will be hit first, while oilfield services and midstream energy operators will feel the knock-on effects of reduced capital spending in the E&P sector.
“Offshore contract drillers are likely to have their toughest year since 2009 and integrated oil majors are in the best position to react to lower prices,” it said.
Moody’s managing director, corporate finance, Steven Wood, said most of the lost revenue would hit the E&P companies’ bottom line if oil prices remained at around $55 a barrel this year.
“As spending in the E&P sector diminishes, oilfield services companies and midstream operators will begin to feel the stress,” he said.