The oil spill and subsequent suspension of drilling permits in the Gulf of Mexico will have a long-term impact on the creditworthiness of oil and gas companies, according to ratings agency Standard & Poors.
“For oil and gas operators in the Gulf of Mexico, the business ramifications are likely to be far reaching and enduring. And regulatory oversight and safety restrictions … will in our view have cost and operational implications for all offshore operators in the US,” the firm said in its CreditWeek publication last week.
Because of the accident, S&P cut ratings on BP, Anadarko, Mitsui & Co. It also put offshore drilling contractor Transocean on “credit watch with negative implications” – a warning to investors that the company will be scrutinised closely and then downgraded if it is affected by liability costs and delays to drilling activities.
As a result of the Department of Interior’s moratorium on issuing new deepwater drilling permits in the Gulf of Mexico, S&P also lowered the credit rating of ATP Oil & Gas, Helix Energy Solutions, Hercules Offshore and Hornbeck Offshore Service, and placed PHI on watch. These firms, together with another 12 named by the agency as “at risk”, develop oil reserves or provide services such as subsea construction, contract drilling or vessels. Many operators declared force majeure against deepwater assets in the Gulf.
Even when the moratorium ends, “the costs of operating in the deepwater Gulf of Mexico, in our opinion, are likely to be higher, with more regulatory hurdles and longer permitting processes.” This will have a negative effect on credit ratings, S&P says.
Meanwhile, a group of investors with a combined $2.5 billion in assets has sent a joint letter to oil companies seeking greater transparency on their risk reduction strategies for their global offshore oil operations.
Ceres, a coalition of investors and environmental groups, said there are now 14,000 deepwater wells worldwide and production of oil from these wells is set to double, from the current rate of 5 million barrels a day to 10 million a day by 2015.
A second letter is being sent to insurance companies underwriting the oil companies.
By. Christopher Cundy
Source: Environmental Finance