Bangkok--21 May--Moody's
Moody's Investors Service sees a stable rating outlook for the Asian oil & gas industry's independent refining & marketing (R&M) sector.
"Fundamentals will likely remain generally solid over the next 1-2 years, driven by strong supply/demand conditions, and despite the inherent volatility in margins, a result in turn of interim factors," Moody's says in a new report.
The report examines the outlook for ratings, refining profitability, diversification, regulatory issues and capital spending in Asia, excluding Japan.
It is authored by Terry Fanous and Alan Greene, both Senior Vice Presidents at Moody's, and is part of the Moody's Industry Snapshot series, which offer succinct and incisive looks at particular sectors.
"Recently, refining margins in Asia have exhibited a favorable trend, which should persist through 2007, based on capacity availability and overall inventory," says Fanous.
"Accordingly, Moody's expects operating performance to remain favourable in the near term, but rating movements are again unlikely because of the highly cyclical nature of margins," says Fanous.
"Moody's further sees limited improvement in the sector's credit metrics over the next 12-18 months because of its high level of capital expenditure requirements, specifically for expanding production, upgrading capacity, or diversifying business mixes," says Greene.
Looking further ahead, substantial new supply coming on line in 2010-11 will likely pressure margins at that point, says the report. At the same time, Initiatives by rated R&M companies to upgrade capacity and diversify operations will help them manage these challenges.
The sector has an investment grade rating profile, generally reflecting scale, solid profitability, downstream integration, and varying degrees of financial leverage.
Copies of the report titled "Stable Outlook and Favorable Margins to Continue, but Margin Volatility and Large Capex Initiatives Hold Back Upgrades " can be found at www.moodys.com
Singapore
Alan Greene
Senior Vice President
Corporate Finance Group
Moody's Singapore Pte Ltd.
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Sydney
Terry Fanous
Senior Vice President
Corporate Finance Group
Moody's Investors Service Pty Ltd
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