Moody’s lowered its outlook for a group of top oil and gas companies to negative on Wednesday saying the sharp drop in oil prices would weigh on revenue into 2016.
With oil having shed more than half of its value since last June, companies such as Royal Dutch Shell, Exxon Mobil and Total have lowered their spending by up to 20 percent, cutting thousands of jobs and reducing costs.
Further reductions will be needed next year, which will hurt companies’ long-term production growth, Moody’s said.
The sector’s free cashflow, or revenue minus spending and dividends, was negative in 2014 as a result of high costs and is expected to plummet to a negative $80 billion in 2015 and only slightly improve in 2016 to $55 billion, the ratings agency said.
Moody’s has lowered its oil price outlook several times since 2014. It currently expects benchmark Brent crude oil to average $55 per barrel in 2015 and $57 a barrel in 2016.
Moody’s expects companies to sell $40-$60 billion of assets in 2015-2016 to improve cashflow after divesting $70 billion in 2013 and 2014.
Among oil majors, Moody’s sees the outlook as stable for Exxon, Total, Chevron, Statoil, Eni and OMV while the outlook for Shell and Repsol is negative. BP stands alone with a positive outlook.