Severe Downturn Prompts Rating Actions Across The European Oil And Gas Value Chain
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- Oil prices and refining margins are showing the combined impact of COVID-19 travel stoppages as well as unrestrained crude oil supply and price discounting.
- With E&P companies cutting their capex by 20%, we believe companies that supply to oil and gas producers now face a very challenging period.
- Refiners' performance will be impacted by collapsing demand for key oil products.
- Engineering and construction will remain an island of stability, but new contract awards may be delayed.
- We are therefore taking rating actions on six European oilfield service companies and two refiners.
LONDON (S&P Global Ratings) March 31, 2020--S&P Global Ratings said today that it has taken rating actions on eight EMEA-based companies following the oil price collapse, as part of its global review of the oil and gas industry (see table 1).
Table 1
Rating Actions On EMEA Oilfield Service Companies And Refiners
Company New Rating Previous Rating Driver
CGG
B-/Stable/-- B/Stable/-- Limited visibility on demand for seismic services under the new oil prices
PGS ASA
B-/Watch Neg/-- B/Stable/-- Limited visibility on demand for seismic services under the new oil prices, and tight headroom under financial covenants
Vallourec
CCC+/Watch Dev/C B-/Watch Pos/B Potential delays in completing a capital increase, together with weakening core markets
Welltec A/S
B-/Negative/-- B-/Stable/-- Weaker market environment
Shelf Drilling Holdings Ltd.
CCC+/Stable/-- B-/Stable/-- Weaker profitability, leading to an unsustainable capital structure
ADES International Holdings Ltd.
B+/Negative/-- B+/Stable/-- Weaker market environment
Corral Petroleum Holdings AB (Publ)
B/Negative/-- B+/Positive/-- Very weak refining industry conditions
Raffinerie Heide GmbH
B-/Stable/-- B/Stable/-- Very weak refining industry conditions