Dubai: Crude oil prices are likely to recover towards the marginal cost of supply around USD 80 per barrel during 2015, a global rating agency has said.
Fitch Ratings said that even at USD 80, key metrics will be weaker than previously expected but the impact on credit ratings will depend on companies' ability and willingness to respond by cutting capex, opex and dividends, or increasing production.
"Our approach with oil and gas companies is to rate through the cycle. We are therefore unlikely to take negative rating action based solely on weaker credit metrics if we assume they are temporary," Fitch Ratings said in a statement.
But this does not mean the current price fall to around USD 60 will not result in downgrades as companies which are already on Negative Outlook, including Total (AA), ENI (A+) and BG Energy Holdings (A-), have less headroom for further underperformance at current prices.
"We will be closely watching Total and BG's ability to increase production, for ENI its ability to turn around its downstream and gas and power segments is key.
"We recently lowered our 2015 price deck to USD 80 from USD 97. This may seem optimistic given Wednesday's Brent price of around USD 60, but we believe USD 80 is the marginal cost and the market will revert to this price over next year," it said.
Companies are already slashing development budgets - the key question is how long this takes to feed through to reductions in supply and increases in price.
Fitch's report 'EMEA Oil and Gas - Forecasts at New Price Deck' is its first assessment of what the EMEA oil and gas sector would look like using the new price deck.
"What our forecasting cannot yet fully reflect is companies' plans for capex, opex and shareholder remuneration because these have typically not yet been announced to the markets or even agreed internally," it added.
