Fitch: U.S. Energy Industry Remains Strong Despite Weaker Commodity Prices
Fitch Ratings continues to maintain a positive view on the U.S. energy industry even as crude and natural gas prices pull back from second-quarter levels, as discussed in its quarterly 'Oil & Gas Insights' available on Fitch's web site. Slowing demand growth coupled with a lack of hurricanes in the Gulf of Mexico have enabled storage levels for both oil and natural gas to reach robust levels, pressuring near-term prices. In addition, the geo-political concerns in such global hot spots as Iran, Iraq, Venezuela, Nigeria and elsewhere have not for the time being resulted in supply disruptions.
From a bondholder perspective, companies continue to generate significant cash flows as commodity prices remain well above historical averages. Most companies have reached their targeted capital structures resulting in minimal cash flows devoted to debt reduction. Fitch continues to focus on how companies choose to direct their remaining cash flows. Most firms continue to spend heavily on capital expenditures; however, credit concerns continue to be focused on cash flows directed to shareholder-friendly activities and acquisitions.
Also provided in this edition is a review of the U.S. upstream natural gas market (titled 'Return to Historical Prices or Temporary Lull'), Fitch's updated oil and natural gas price deck, and updates on downstream markets (titled 'Downstream Update - Crack Spreads Fall Back to Earth'), and the oilfield services sector (titled 'Record Storage Levels Begin to Put the Brakes on Drilling Activity'). Fitch provides a detailed analysis of the underlying market fundamentals for each of the sectors.Fitch Ratings' 'Oil & Gas Insights' is a quarterly newsletter analyzing key trends in the upstream, downstream, and energy services industries. The newsletter also provides ratings and Outlooks for all issuers rated by Fitch in the energy sector. The full 'Insights' is available on the Fitch Ratings web site at www.fitchratings.com.
Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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