Moody’s: National oil companies to stick to cost-efficiency strategies even as price recovers

Moody’s said tighter spending and cost efficiency strategies adopted by national oil companies (NOCs) globally in response to the 2014-2016 oil price collapse will largely remain in place as prices recover. — Reuters pic
Moody’s said tighter spending and cost efficiency strategies adopted by national oil companies (NOCs) globally in response to the 2014-2016 oil price collapse will largely remain in place as prices recover. — Reuters pic

KUALA LUMPUR, May 17 — Tighter spending and cost efficiency strategies adopted by national oil companies (NOCs) globally in response to the 2014-2016 oil price collapse will largely remain in place as prices recover, says Moody’s Investors Service.

In a report, the rating agency examined how changes in policy and structure since the slump, will affect some the largest NOCs in the near future.

“Even though strategies for each NOC depends on a number of factors such as the relationship with their national governments and prices in local markets, national oil companies overall have strived to cut costs, adjust growth strategies or sell assets as much as non-sponsored private oil companies have done,” Managing Director for the Oil & Gas Team, Steve Wood said.

Wood said in an environment of recovering international oil prices, the adjustments made in the past few years will allow some NOCs to invest in core businesses, while others could increase production or their foreign footprint. 

The decline in oil prices significantly weakened earnings before interest, taxes, depreciation, and amortisation (EBITDA) for Petronas (A1 stable), but even so, the largest integrated oil and gas company in south and Southeast Asia maintained its strong liquidity and low leverage during the downturn.

Malaysia’s Petroliam Nasional Bhd (Petronas), for example, has a significant upstream business compared to its downstream operations.

Its EBITDA fell by about 40 per cent in 2016 from 2013 levels, but strong liquidity and leverage helped Malaysia’s (A3 stable) national oil company weather the downturn.

In 2016, Petronas announced a cut in its annual operating and capital spending by about RM50 billion for 2016-2019.

Besides renegotiating contracts, it also reduced capital spending by choosing not to proceed with a major overseas project. — Bernama

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