In a move that will affect some Oklahoma energy companies and their possible borrowing abilities, Fitch Ratings in New York has revised its 2016 rating outlook for the U.S. Oil and Gas industry to Negative from Stable.
It’s due to the impact of falling oil and gas prices and observers and experts say it’ll likely increase the number of negative ratings actions seen in the industry.
As of earlier this week, 29 percent of the companies in Fitch’s U.S. oil and gas portfolio had Negative Outlooks. Fitch says the low prices hit the high yield oil and gas issuers last year and they are still under considerable stress as the downturn continues. Single ‘B’-rated companies in particular face a variety of challenges, including a higher cost base, declining hedge coverage, lack of financeable assets and limited market access.
All of those factors mean the credit impact of the lower oil and natural gas prices is rippling across the investment grade energy space. Fitch Ratings says most investment grade names have decent liquidity, costs positions, capex flexibility (as witnessed this week at Continental Resources and Williams Cos.) and capital markets access, but the existing environment has pressured credit metrics enough to put downward pressure on ratings.
Among those getting Negative Outlook include ConocoPhillips, Hess and Southwestern Energy Company. Earlier this week, Fitch Ratings downgraded Oklahoma City-based Enable Midstream Partners’ long-term Issuer Default Rating senior unsecured debt and revolving credit facility to ‘BBB-‘ from ‘BBB’. However, the firm still gave Enable a ‘stable’ rating outlook despite its outstanding debt of $3.2 billion.
It was in early January when Fitch Rating suggested two Oklahoma City-based firms might be among the troubled companies slumping toward Chapter 11. It named SandRidge Energy and Chesapeake Energy. They made the list after losing more than 90 percent of their market value since 2014 while their debt continued to grow.