[ET Net News Agency, 7 May 2020] Moody's Investors Service said in a new report that
drastically lower oil prices will hurt Asian national oil companies (NOCs), but that
sovereign support will continue to underpin their credit quality.
"Rating changes for Asian NOCs are likely to be small despite low oil prices straining
their credit metrics. We expect that additional notches of uplift owing to sovereign
support could be incorporated in the ratings of most NOCs should their Baseline Credit
Assessment (BCA) decline," said Vikas Halan, a Moody's Senior Vice President.
NOCs that have hedged the price risk for a portion of their production will be better
positioned to withstand the sharp decline in crude prices in the near term. PTT will
benefit from hedges at a price floor of US$55 per barrel for approximately 40% of the
crude sales volume at its upstream subsidiary. Meanwhile, the pricing of the domestic gas
contracts at Pertamina are not linked to spot oil prices, and will partially mitigate its
exposure to oil price volatility.
NOCs with large cash reserves, such as CNPC and Malaysia's PETRONAS, can protect their
credit profiles from low oil prices for at least the next 12-18 months.
Cash preservation will be a priority during the low oil price environment, and NOCs are
likely to scale back shareholder returns, capital spending and investments. However,
dependence on oil and gas sector revenue by some sovereigns could constrain the ability
for their respective NOCs to reduce dividends.
"Additionally, we expect most NOCs to have solid liquidity and strong access to capital
markets given their strategic importance. Pertamina and PETRONAS have successfully raised
US$3 billion and US$6 billion respectively via the debt market thus far in 2020," added
Halan. (KL)