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SYDNEY, Dec 11 AAP - Moody's Investors Service said today the
rating outlook for oil and gas companies in the Asia-Pacific is
stable.
However within the sector itself, differences are evident as the
prospects for the exploration and production (E&P) business are
better than those for refining and marketing (R&M), Moody's said.
Moody's said that state ownership and the strategic role of the
oil and gas sector in national economies - two considerations that
are key supports for individual ratings and outlooks - provide the
basis for the stable outlook of several companies.
"These conditions have reduced event risk for regional energy
companies, shielding them from the M&A activities that the major
international players have pursued the past 2 years as part of the
process of industry consolidation," Vice President/Senior Analyst
Terry Fanous said in a recent report.
As a result, compared to the rest of the world, few ratings
changes have occurred in the region, the report says.
Moody's rates a total of 14 oil and gas companies in the
Asia-Pacific, affecting about $US12.5 billion in debt, according to
the report.
Most of these 14 companies are major operators in their own
countries.
The report said that the region's E&P sector is faring better
than the R&M business.
E&P companies have improved their leverage on a
debt-to-proved-reserves basis during the recent oil up-cycle, and
are appropriately positioned in their ratings to face the potential
for lower crude prices in 2003.
However, higher capital spending is increasing risk for some E&P
companies, Moody's noted in the report.
The higher needs are mainly related to exploration, reserve
development, and overseas investments, and will consume a
significant part of the companies' free cash flow, the report says.
The report notes that overseas investment opportunities will
support the companies' growth strategies and any resultant
diversification in reserves will be favourable for their credit
profiles.
"However, our concerns about management inexperience with
overseas ventures will temper the benefits of such diversification.
Some of these ventures may also occur in countries with relatively
high political risk," Mr Fanous said.
Moody's said it was cautious on the R&M sector.
It said that significant over-capacity in refining continues to
dog the region, while product imports have further exacerbated the
market.
Consequently, no material improvement in the sector's operating
conditions is expected over the medium, and refining margins and
cash flow at R&M operations through the Asia-Pacific will remain
relatively weak.
"This conglomerate of factors constrains the ratings of the R&M
companies," the report said.
AAP