News Column

Fitch Publishes North American Exploration and Production Industry Handbook

July 16, 2014



NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has published its 'North American Exploration and Production Industry Handbook,' which provides an analysis of trends in the North American oil and gas sector, including commodity prices, rig counts, and financial and upstream comparison tables.

Geopolitical conflict and supply concerns as well as consistent global demand growth for crude oil continue to support high crude prices. Fitch believes that this will continue to be the case in the second half of 2014. Exploration and production (E&P) companies with meaningful crude oil production in their production mix will continue to benefit and post improved cash flows and credit metrics. The biggest macro risk from a credit standpoint for E&P investors is a reduction in global demand growth for crude and resulting downward pressure on crude prices. Firms with a large NGL component in their liquids production mix have not and likely will not benefit to the extent that crude-focused producers have benefited.

Henry Hub natural gas prices staged a rebound in 2014 as a cold winter depleted a large amount of inventory in the United States. Associated gas production combined with a relatively cool start to the summer is helping to rebuild inventory levels, though they remain below the five-year average. Fitch sees natural gas prices mostly range bound between $4 and $4.50/thousand cubic feet (mcf) over the short- to intermediate-term given ongoing North American supply and demand dynamics.

As a result of high oil prices and the rebound in natural gas prices, E&P producers should post strong credit metrics this year. On balance, investors believe current industry conditions will persist as credits spreads have remained very tight. Rating Outlooks are generally stable across the investment-grade space.

Activist pressures generally seem to have abated in 2014 for E&P companies. Results from shareholder pressures in 2012 and 2013 included pruning of asset portfolios and a separation of downstream assets, and generally did not result in downgrades or harm bondholders. Going forward, shareholders want to see companies allocate capital prudently, which aligns with bondholder interests.

The report has detailed information for 28 companies, providing key credit strengths, concerns, upstream performance highlights, as well as a summary of key operating and financial metrics.

The North American Exploration and Production Industry Handbook is available on the Fitch web site at 'www.fitchratings.com' or by clicking on the link.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: North American Exploration and Production Handbook

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749557

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Sean Sexton, CFA, +1 312-368-3130

Managing Director

Fitch Ratings, Inc.

70 W. Madison

Chicago, IL 60602

or

Media Relations:

Brian Bertsch, +1 212-908-0549

brian.bertsch@fitchratings.com

Source: Fitch Ratings


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