Raffica di rating actions negative di S&P sul comparto, su aspettative di un andamento debole dei prezzi dell'oil nel 2010 e di una serie di altri fattori attinenti ai singoli emittenti. Tenete conto (questo S&P non lo dice) circa i prezzi dell'oil che molto dipenderà anche dalle decisioni che verranno prese in relazione al modus operandi consentiti per il trading su questa commodity.
Dovesse passare la linea per cui chi acquista i futures sull'oil è tenuto a versare depositi cauzionali di una certa consistenza sui principali mercati regolamentati, così tagliando le unghie alla speculazione nel comparto, il prezzo dell'oil potrebbe attestarsi stabilmente su livelli contenuti... molto più contenuti di quelli attuali.
Il report, estratto da una teleconferenza tenutasi un paio di giorni fa, è molto ricco sia sul piano dell'outlook compartimentale che su quello degli elementi concernenti le singole oil companies prese in esame, per le quali si preannuncia la pubblicazione di singoli report ove interessate da rating actions.
Per chi è investito nel comparto, vale la pena provare a leggere tutto...
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Various Rating Actions On European Oil And Gas Majors;[/FONT]
(
Editor's Note: In the article published Sept. 3, 2009, the long-term rating
on Total S.A. was misstated at the end of the second paragraph. A corrected version follows.)
- We are lowering our long-term ratings on Royal Dutch Shell to 'AA' from 'AA+'. The outlook on Shell is stable. We are revising to negative from stable our outlooks on Eni SpA (AA-/Negative/A-1+) and Total S.A. (AA/Negative/A-1+), while affirming the ratings. We are also affirming our ratings on BP PLC (AA/Stable/A-1+).
- Capital expenditure- and dividend-driven pressures on free cash flow contributed to all the rating decisions. For Shell in particular, we expect these pressures to lead to sizable further rises in debt in 2009 and 2010, albeit from a very low initial level.
- In Shell's and Total's case, their slightly less conservative leverage policies, including shareholder distributions, coupled with our expectation of a prolonged refining downturn also contributed to the downgrade and outlook revision respectively.
- For Eni, the outlook revision to negative also stems from its current high debt relative to peers, and, secondarily, from pressure on downstream profits (including increased competition in its gas segment) as well as uncertainty on pending chemical-related environmental litigation.
- We could lower by one notch the long-term ratings on Total and Eni by mid-2010, barring clear signs of a strong near-term recovery in discretionary cash flow generation or credit-supportive actions (like Eni's recent decision to lower its dividend).
PARIS (Standard & Poor's) Sept. 3, 2009--Standard & Poor's Ratings Services said today that it has lowered its long-term corporate credit ratings on Royal Dutch Shell PLC by one notch to 'AA' from 'AA+'. The outlook on Shell is stable.
At the same time, we revised to negative from stable our outlooks on Total S.A. and Eni SpA. We have affirmed our 'AA/A-1+' ratings on Total and our 'AA-/A-1+' ratings on Eni.
The 'AA/A-1+' ratings BP PLC were also affirmed. The outlook on BP remains stable.
A teleconference will be held Friday Sept. 4, to discuss the companies concerned. Registration and dial-in details are given below.
The rating actions follow our review of Europe-based integrated oil and gas companies and reflect our perception of negative near-term prospects for these companies' cash flow generation after capital expenditure and dividends, first highlighted in our research published March 6, 2009, on RatingsDirect, "Rating Pressure On European Oil & Gas Majors Likely If Negative Free Cash Flow After Dividends Continues Into 2010," and confirmed by first-half 2009 results.
For all companies, free cash flow generation is below our typical expectations for 'AA' rated corporates with "minimal" financial risk profiles. Secondarily, the rating actions reflect the following negative trends that apply to companies to various degrees:
- An overall weak track record on upstream production growth this decade and uncertainty on future growth prospects.
- Steady decline trends for OECD production this decade and gradual production shifts toward non-OECD countries. This also entails increasing analytical risk in terms of insight into (1) highly complex contractual (profit sharing contract [PSC]) cash flow and accounting impacts; and (2) rising shares of equity affiliates; disclosures in both these areas tend to be very limited.
- The unprecedented recent volatility of commodity prices and cost inflation, combined with the cyclical downturn in refining.
On the positive side, the following supportive factors continue to underpin high credit quality in the sector:
- These four companies' continued strong and diversified funds from operations (FFO), coupled with major ongoing cost-cutting programs.
- Significant upside to current oil and gas prices in the longer term. Having recently recovered, oil prices of $65-$70/barrel stand above the $55-$60/barrel working assumptions used in our credit analysis. To various degrees, this benefit is partly offset by very low U.S. gas prices, soft liquefied natural gas (LNG) markets, and a negative refining sector outlook, in our view.
- Overall modest debt leverage at year-end 2008.
- Financial flexibility and continued access to favorable long-term funding, even during the recent credit squeeze.
Regarding cash flow-specific pressures, we believe these are most prevalent at European integrated majors, which pay materially higher dividends than their U.S. counterparts. The U.S. majors favor more flexible share buybacks.
For the rated European majors, we expect on average:
- Negative discretionary cash flow (calculated as FFO less capital expenditure less dividends) in 2009 and most likely also in 2010 under our $55/barrel Brent working assumption ("Standard & Poor's Changes Short-Term Oil And Gas Pricing Assumptions And Maintains Long-Term Pricing Decks," published on RatingsDirect on Aug. 19, 2009), combined with significant uncertainty on the degree and pace of a recovery to levels consistent with a minimal financial risk profile.
- Under our pricing assumptions, we expect 2009 adjusted credit metrics such as FFO-to-debt ratios to vary between 45% and 60%, which is low for some of the strongest ratings in our corporate ratings universe. Also, the degree and pace of recovery of credit ratios to levels consistent with these high rating levels (generally 60%-70% FFO to debt) are uncertain.
- We expect discretionary cash flow to remain weak relative to rating levels well into 2011 under our $60/barrel oil price assumption, reflecting: (1) continuously high capital expenditure with low visibility on any strong near-term reduction. We expect 2009 capital spending to be 1.6x-2.2x the 2004 level, while, on average, under our $55/barrel Brent assumption, 2009 FFO levels should not be too different from 2004 levels; and (2) generous shareholder distributions, with 2009 dividends around 1.4x-1.7x higher than in 2004 and current payout rates in the order of 70% of net income. Dividend payouts are significantly higher than free cash flow as capital expenditure tends to be 1.7x-2.0x depreciation. Only Eni has reduced its interim 2009 dividend, by 23% in euro terms. For some companies, share repurchases continued until late 2008.
In addition to the above general items, company-specific factors are discussed below. Please also see the updated summaries on these companies, which we will publish shortly.
ROYAL DUTCH SHELL PLC
Company-specific elements that contributed to our downgrade of Shell are:
- The material change in its gearing target (debt-to-debt plus equity). Shell raised it to 20%-30% (from 20%-25%), but more importantly, Shell's debt measure now refers to financial debt only, whereas Shell's previous guidance included off-balance-sheet adjustments in its gearing, such as operating leases and postretirement deficit (about $25 billion combined at year-end 2008).
- The 5% dividend increase announced earlier this year; this is, however, in line with Shell's declared long-term payout policies.
- Expected very sizable debt increases in 2009 and in 2010. Under our scenario, Shell's financial debt, net of all reported cash, could exceed $35 billion by the end of 2010, up from $19.5 billion at June 2009, starting from a low of $8 billion at year-end 2008. This equates to gearing in the low 20%s. Should Shell's gearing rise to 25%, or the middle of its gearing band--which we have not assumed--this would equate to $45 billion of net debt.
- Shell's above-average exposure to depressed refining and chemicals markets and resulting considerable declines in near-term FFO at a time when the company is facing the highest investment funding needs in the industry.
- Weaker-than-expected upstream production growth overall since 2003, including in first-half 2009.
Partly mitigating these negatives are:
- Shell's financial flexibility from large cash balances and current still-modest gearing (13% at end-June 2009). The above-mentioned increased debt expectations would remain in line with most peers and our view of a minimal financial risk profile, but are materially different from the very conservative levels factored into the previous ratings.
- An announced 10% reduction in 2010 capital expenditure to a still massive $28 billion.
- An expected strong reduction in Shell's postretirement deficit (of $9.5 billion at end-2008), after a recent $3.6 billion in top-up payments and recovery in equity values--equities represented about $21.7 billion of its pension fund assets at year-end 2008; on the other hand, discount rates are likely to be significantly lower than at the end of 2008.
- Cash flow metrics and discretionary cash flow should improve materially but only by 2011-2012 thanks to forecast major contributions from various large projects (such as Qatar GTL and Qatargas 4 (LNG)); management has indicated that over $40 billion of assets are currently under construction.
ENI SPA
In addition to the above general factors, the following company-specific elements also contributed our outlook revision and rating affirmation on Eni:
- Low financial headroom within the current rating, given financial debt that is higher than peers', at €18.4 billion ($25.8 billion), net of all reported cash, at mid-year 2009.
- Expectations of high capital expenditures in 2009-2010, implying some modest further increases in debt under our scenario.
- Perceived increased risk in relation to pending legal proceedings in relation to environmental issues with respect to its Syndial subsidiary. According to the company's second-quarter report, litigation "may have a significant negative impact on 2009 second-half results."
- Weak first-half 2009 downstream conditions when aggregating losses in refining, petrochemical, and Syndial operations; as well as pressures in its downstream gas segment, given the drop in gas sale volumes and likely rising domestic competition.
Partly mitigating these negatives are:
- Eni's relatively low exposure to the depressed refining segment and significant cash flow stability provided by more resilient gas downstream activities.
- Management's decision to reduce the interim dividend by 23% and the possibility of further disposals of noncore exploration and production (E&P) assets.
- Eni's more satisfactory track record and outlook for production growth, despite the unexpected production decline in first-half 2009 (1.6%).
TOTAL S.A.
In addition to above general factors, the following company-specific elements also contributed to our outlook revision and rating affirmation on Total:
- Our expectation of negative cash flow after dividends in second-half 2009 and 2010 and weak prospects of recovery to significantly positive levels in 2011, reflecting in particular sustained capital expenditure.
- The adjustment of the company's gearing target (financial debt, net of all reported cash, to equity, net of pending dividends) to 25%-30% (from 20%-30%), despite the gradual sell-down of sanofi-aventis S.A. shares.
- Weaker-than-expected upstream production growth overall since 2003 and up to first-half 2009, and expected modest medium-term growth prospects, despite a series of large field startups in second-half 2009.
- High and increasing upstream exposure to emerging markets; end-2008 proven reserves in Europe and North America represented only 19%, down from 27% at the start of the decade.
- Also, in refining and chemicals, above-average exposure to depressed European markets, and several significant recent industrial accidents.
Partly mitigating these negatives are:
- Still-moderate financial debt, net of all reported cash, at €12.3 billion at end-June 2009 ($17.2 billion).
- Flexibility related to the sale of sanofi shares.
- Our perception of lower cash flow downside in 2009 than most European and certainly U.S. peers, reflecting above-peer profit resilience in the first half.
BP PLC
We have affirmed the ratings on BP, with a stable outlook, on the basis of:
- Its comparatively lower cash flow breakeven price levels in light of BP's lower capital expenditure.
- A modest increase (of $2 billion) of financial debt, net of all reported cash to $27.1 billion in the first half of 2009.
- The ongoing turnaround of its downstream operational performance and higher-than-expected related profits in the first half of 2009 (although helped by exceptionally high trading profits).
- Current production growth that is stronger than peers' (3.6% year on year).
- Credit quality improvements at affiliate TNK-BP International Ltd.
- A possible reduction in BP's end-2008 $6.7 billion postretirement deficit, in light of the recovery in equity values (which represented about $18.5 billion of its pension fund assets), although this impact may be offset by likely lower discount rates to be used this year compared with end-2008.
That said, we evaluate BP's financial headroom within the rating to have decreased, as:
- We estimate that BP's financial debt, net of all reported cash, could rise further to above $30 billion at year-end 2009 with gearing of close to 25% (22% at end-June 2009); we nevertheless note management's commitment to bring gearing down to the lower end of its 20%-30% gearing band, when cash flow generation allows.
- BP's cash flows remain most exposed to currently extremely low U.S. gas price realizations ($2.92/million British thermal units [mmBtu] in first-half 2009 compared with $7.7/mmBtu the previous year).
