Russia’s Energy Firms Withstand Low Oil Prices – Fitch

Posted: February 2, 2015 in Econ 101, Sanctions on Russia Meaningless, Technology and Energy


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Russia energy firms to withstand low oil prices, says Fitch
StockMarketWire.comLow oil prices should not directly affect ratings of Russian oil and gas (O&G) companies, as their fundamentals will remain solid for the rating levels because of their financial flexibility, Fitch Ratings says.

The ratings agency says possible intensification of sanctions, lack of external finance and the direction of the sovereign rating are more important factors driving Russian O&G ratings for now.

Firtch says: “Stress testing Russian O&G companies assuming no recovery in oil prices (average 2015-17 oil prices at USD55/bbl and USD/RUB exchange rate at 60) shows their credit burden, as measured by net leverage, should remain acceptable for the current rating levels.

“We expect limited downgrades triggered directly by low oil prices. Some companies are likely to see their interest coverage ratios fall below our negative rating action guidance due to higher cost of funds, but this factor alone should not result in a downgrade, as long as an issuer’s leverage and other metrics are commensurate with the rating level.”


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