S&P: Oil-sector credit looks strong for 2012-2013
By Angel Gonzalez
Standard & Poor's said Friday that low natural-gas prices are unlikely to affect the credit of the oil sector in general, as companies have kept relatively low debt levels compared with other sectors, and, in many cases, high oil prices offset lost natural-gas revenue.
In a news release, the credit-ratings company said companies with proven reserves of oil and related liquids, as well as oil-field-services companies, are poised for "strong operating performance" despite the depressed natural-gas market. The situation is likely to continue for the remainder of 2012 and 2013, the agency said.
Until recently, natural-gas prices were trading at decade-low levels below $2 per million British thermal units, a long way down from their peak above $13/mmBtu in July 2008. The decline was a result of both decreased demand amid the economic crisis and an unexpected glut of supply unleashed by oil companies tapping shale formations across North America.
"High oil prices and relatively low debt leverage for the sector should help these producers maintain their credit quality," said Standard & Poor's credit analyst Thomas Watters in a statement.
But S&P added that some companies have defaulted in the past year, as their natural-gas-focused portfolios wouldn't enable them to keep up with their obligations.