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Moody’s negative outlook for Asia oil & gas, petrochemical

Posted on: March 17, 2009

Bernama – Tuesday, March 17

KUALA LUMPUR, March 17 (Bernama) — Moody’s Investors Service sees a negative outlook for the Asia Pacific’s exploration and production (E&P), refining and marketing (R&M) as well as petrochemical sectors over the next 12 to 18 months.


It said the precipitous fall in energy prices has hit margins and cash flow at E&P issuers, while rapidly falling demand has squeezed profits at R&M and petrochemical issuers, which held higher-cost inventories and faced new capacity coming onstream.

Moody said this in its report, “Asia-Pacific (ex Japan) Oil, Gas, and Petrochemical Sectors: Falling oil prices, weak demand, and new capacity weigh on industry players”.

The report’s lead author Tony Tsai, a senior vice president, said despite the E&P sector’s negative outlook, ratings on investment-grade E&P companies in the region is likely to remain stable as adequate-to-strong financial profiles enable them to withstand such energy-price volatility.

“However, for speculative-grade issuers, downward rating pressure will emerge from their reduced cash flows, the need to replace reserves, and large capex requirements,” he said.

Meanwhile, a Moody’s vice president and contributor to the report, Renee Lam said the fall in demand for refined products and the advent of new refining capacity in the region would keep margins under pressure and weigh on the operating performance of most refineries.

“The negative industry outlook in the R&M sector is due to demand changes that appear to be structural and enduring, as well as a looming over-supply,” she adds.

As a result, Lam said that refining margins could drop to low-cycle levels, which could weigh on the ratings and outlook for some Asian refineries during the next 12 months.

The negative outlook in the Asia-Pacific petrochemical sector reflects petrochemical manufacturers’ deteriorating margins, resulting from weak demand, a slowing economic environment, and new capacity coming online in the Middle East and China in 2009 and beyond, she added.




1 Response to "Moody’s negative outlook for Asia oil & gas, petrochemical"

Hello fellow members, I wanted to introduce myself. Im Kenneth.
I guess I should start participating instead of just reading the posts all the time.
I thought about starting my own board but Im glad I found this one instead. Great Info!

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