"The steep drop in crude oil prices since mid-2014 will materially reduce the earnings and cash flows of these companies and weaken their credit metrics in 2015," says Vikas Halan, a Moody's Vice President and Senior Credit Officer.
In particular, Moody's expects those with a higher reliance on earnings from oil -- specifically, Pertamina (Persero) (P.T.) (Baa3 stable), China National Offshore Oil Corporation (CNOOC, Aa3 stable) and PTT Exploration & Production Public Co. (PTTEP, Baa1 stable) -- to see their credit quality weaken the most, given our oil price assumptions.
"But even with the deterioration in credit metrics, most Asian oil & gas companies will remain well-positioned at their current rating levels because their large liquidity buffers provide them with the financial flexibility to absorb the weak selling prices," adds Halan.
Most have cash balances which are more than sufficient to meet their debt obligations and working capital needs over the next 12 months.
Moody's also believes that the ratings for the national oil companies in the region remain supported by their associated sovereigns. Most are rated at par with their sovereigns, reflecting their strategic importance to their individual country's energy agenda as well as the high likelihood of strong support from their government.
"Even if the baseline credit assessment (BCA), or standalone credit profile, of these companies weaken, the final rating will likely remain unaffected as a result of sovereign support," adds Chua.
Downstream refiners will benefit from some support in regional refining margins and lower borrowing requirements to fund fuel subsidies that have declined as a result of energy reforms in Indonesia, India and China.
At the same time, Moody's expects refiners will be affected by high inventory losses in the last quarter of 2014 and into early 2015 as oil prices decline.
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