• 5 minutes Desperate Call or... Erdogan Says Turkey Will Boycott U.S. Electronics
  • 11 minutes Saudi Fund Wants to Take Tesla Private?
  • 17 minutes Starvation, horror in Venezuela
  • 1 hour WTI @ 67.50, charts show $62.50 next
  • 7 hours Permian already crested the productivity bell curve - downward now to Tier 2 geological locations
  • 10 hours Newspaper Editorials Across U.S. Rebuke Trump For Attacks On Press
  • 6 hours WTI @ 69.33 headed for $70s - $80s end of August
  • 16 mins The Discount Airline Model Is Coming for Europe’s Railways
  • 54 mins Pakistan: "Heart" Of Terrorism and Global Threat
  • 34 mins Venezuela set to raise gasoline prices to international levels.
  • 10 hours Batteries Could Be a Small Dotcom-Style Bubble
  • 22 hours Corporations Are Buying More Renewables Than Ever
  • 11 hours Mike Shellman's musings on "Cartoon of the Week"
  • 23 hours Renewable Energy Could "Effectively Be Free" by 2030
  • 16 hours Scottish Battery ‘Breakthrough’ Could Charge Electric Cars In Seconds
  • 13 hours France Will Close All Coal Fired Power Stations By 2021
  • 12 hours Don't Expect Too Much: Despite a Soaring Economy, America's Annual Pay Increase Isn't Budging

Breaking News:

SEC Tesla Probe Not New: Report

Alt Text

The Next Big Thing In Enhanced Oil Recovery

Savvy energy investors are constantly…

Alt Text

They're Giving Away Cash To Help Copper Miners Here

Chile’s government has announced that…

Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

More Info

Trending Discussions

Here Are The First Two High-Profile Downgrades In Energy And Mining

I wrote in late January about 175 mining and energy firms being placed on watch for credit downgrades — potentially signalling a wave of financial problems coming across the resources sector.

And this week the ratings shoe dropped on two big names — one in mining, and one in oil and gas.

The first casualty was the world’s largest copper miner, Chile’s state firm Codelco. Related: Computerized Trading Creating Oil Price Volatility

S&P this week said it is lowering Codelco’s rating to A+, down a notch from AA-. Which knocks the major miner out of the classification of “high grade” debt, into the “upper medium grade” segment.

Justifying the downgrade, S&P cited lower copper prices — and also said that declining ore grades at Codelco’s mines are a risk to cash flows going forward.

As a final note, the ratings agency said that Codelco’s ambitious capital spending plans over the next few years are likely to drive the miner into deficit. With S&P saying it expects a cash flow shortfall of $1 billion at the firm for 2016, growing to a deficit of $2 billion in 2017 and $3 billion in 2018 — even assuming that the Chilean government injects $2.4 billion in new funds for the firm. Related: Iran Signs Oil Deal With Total, Deal Done In Euros

S&P did however maintain Codelco’s outlook at stable. Which was more than ratings agencies could say for a big player in the offshore oil and gas space — Fieldwood Energy, a major Gulf of Mexico operator backed by private equity giants Riverstone Holdings.

On Monday, Moody’s took the axe to Fieldwood’s credit ratings. Lowering the company’s first-lien debt to Caa1 (substantial risks) from a former Ba2 (non-investment grade speculative) rating — and dropping Fieldwood’s second-lien debt all the way to Ca (extremely speculative/default imminent).

Moody’s cited Fieldwood’s weak capital structure and liquidity as reasons for the downgrade — as well as expectations that the company will have trouble covering its debt as commodity hedges come off through 2017. Causing the agency to adopt a “negative” outlook for Fieldwood. Related: In Spite Of Oil Price Slump, Speculators Drive Bets To Record Levels

“Based on our expectations for low oil and natural gas prices over the next several years,” said analysts, “Moody’s believes it is likely that Fieldwood’s debt will need to be restructured.”

That would be a major blow for a firm that’s attracted billions in capital from some of the world’s biggest energy private equity groups. Showing that the current downturn has caught even industry insiders off guard in a major way. Watch for more, similar stories unfolding soon.

Here’s to seeing it coming

By Dave Forest

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News