"We expect Asian upstream oil and gas companies to post weaker results for the quarter ending 31 March 2015," says Vikas Halan, a Moody's Vice President and Senior Credit Officer.
"Companies with strong liquidity, exposure to natural gas, and flexibility to reduce production costs will be best-positioned to weather this downcycle," adds Halan. "As Asian upstream producers cut or defer exploration activities to preserve cash, we also anticipate that oilfield services companies will see earnings come under pressure."
On the downstream segment, Moody's expects regional refiners to benefit from improving margins and refined product spreads in the first quarter. However, the regional refining margin will remain weak in 2015, but largely flat against 2014 levels of around $6 per barrel, as capacity additions continue to outpace demand growth.
Moody's publication also notes that the natural gas price reduction in India from 1 April is credit negative for upstream producers Oil and Natural Gas Corporation Ltd (Baa2 stable) and Oil India Limited (Baa2stable) because it will lower their revenue and cash flows, which are already under pressure from low oil prices.
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