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Outlook for Asian oil and gas E&P positive in 2014: Moody's
Moody's Investors Service says that the outlook for the Asian oil and gas industry's exploration and production (E&P) sector is positive for 2014, while that for refining and marketing (R&M) is stable
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oody's Investors Service says that the outlook for the Asian oil and gas industry's exploration and production (E&P) sector is positive for 2014, while that for refining and marketing (R&M) is stable.
The E&P outlook is based on Moody's expectation that earnings before interest, taxes, depreciation and amortization (EBITDA) will grow by more than 5 percent in 2014 as the outspending of cash flow eases, investments in drilling increases and the development of new resources improves E&P companies' returns on investment.
The R&M outlook reflects slower growth in refined product demand in 2014, with a modest recovery in the US, but a pull-back in Asia and Latin America, and continued weakness in Europe.
Moody's conclusions were contained in a just-released report titled "2014 Outlook: Asian Oil & Gas - Stable Oil Prices Support Upstream Companies While Downstream Firms Face Continued Headwinds". The report was authored by Vikas Halan, Moody's vice president and senior analyst, and Rachel Chua, an associate analyst with the Moody's.
With the E&P sector, Moody's could move to a stable outlook if the price of West Texas Intermediate (WTI) crude oil fell below US$85 per barrel and natural gas prices approached $3 per thousand cubic feet (mcf).
The reliance on rising crude import will support upstream acquisitions. Moody's expects Asia's growing reliance on crude oil and natural gas imports to fuel more overseas upstream acquisitions by national oil companies (NOCs) to secure long-term energy needs. Most Asian NOCs have comfortable headroom within their ratings for acquisitions, despite sizeable overseas investments over the past year.
The Moody's report also says that the expected increase in domestic gas prices in the region will benefit upstream companies, particularly those in India. China has also recently made upward revisions to its gas prices.
