• 5 minutes Rage Without Proof: Maduro Accuses U.S. Official Of Plotting Venezuela Invasion
  • 8 minutes What Can Bring Oil Down to $20?
  • 14 minutes Paris Is Burning Over Climate Change Taxes -- Is America Next?
  • 4 hours Alberta govt to construct another WCS processing refinery
  • 6 hours Let's Just Block the Sun, Shall We?
  • 2 hours Venezuela continues to sink in misery
  • 6 hours Instead Of A Withdrawal, An Initiative: Iran Hopes To Agree With Russia And Turkey on Syrian Constitution Forum
  • 1 day U.S. Senate Advances Resolution To End Military Support For Saudis In Yemen
  • 4 hours Water. The new oil?
  • 1 day Quebecans Snub Noses at Alberta's Oil but Buy More Gasoline
  • 2 days OPEC Cuts Deep to Save Cartel
  • 24 mins USGS Announces Largest Continuous Oil Assessment in Texas and New Mexico
  • 4 hours Regular Gas dropped to $2.21 per gallon today
  • 2 days $867 billion farm bill passed
  • 1 hour Will Libya Ever Recover?
  • 2 days Global Economy-Bad Days Are coming
Turkmenistan’s Pipeline Project Faces More Hurdles

Turkmenistan’s Pipeline Project Faces More Hurdles

While Turkmenistan chivvies along its…

Crypto Mining Could Leave This Region Without Power

Crypto Mining Could Leave This Region Without Power

Authorities in Abkhazia are trying…

India’s Oil Majors To Lift Borrowing To Cover Dividends, Capex

Refinery

India’s three major state-held oil refining and marketing firms—Indian Oil Corporation (IOCL), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL)—will increase borrowings to keep their large dividend payments and high capital spend, Moody’s Investors Service said on Tuesday.

“These companies’ large dividend payments and high capital spending levels will keep their credit metrics weak, particularly in relation to retained cash flow on debt,” Vikas Halan, a Moody’s Vice President and Senior Credit Officer, said.

India’s major oil refiners increased dividend payments in fiscal year 2017 compared to fiscal year 2016. This, coupled with the high capital expenditure and acquisition of upstream assets, has “weakened their credit metrics in fiscal 2017 to below the rating tolerance levels for their standalone credit profiles,” Moody’s said.

In fiscal 2018, the cash flows from operations would not be enough to cover capital spending and dividend payments, so the companies will fund the shortfall with borrowings, the rating agency said. However, Moody’s expects the credit metrics of the companies will improve in fiscal year 2018 due to higher sales, better margins, and reduced dividend payments.

“Even then, that level of dividends is more than double the total paid in fiscal 2016,” Moody’s Halan commented on the expected reduced dividend pays in fiscal year 2018.

In terms of capex, all three companies are expected to keep their high spending levels over the next few years, with the 2018 combined spend up by some 15 percent annually, excluding acquisitions.

Related: Oil Price Volatility Is Set To Return

At the beginning of 2017, when it affirmed the three companies’ ratings, Moody’s said that the companies would continue to expand their capacities in line with the growth in demand for petroleum products in India.

“The continued need to expand capacity and investment in upstream assets could result in increased borrowings and weaker credit metrics, especially if refining or marketing margins decline,” Moody’s said on January 5.

India’s government plans to sell by the end of this year its 51.1 percent stake in the third-largest local refiner HPCL to the country’s biggest explorer, state-held Oil and Natural Gas Corporation (ONGC), in a deal valued at around US$4.5 billion.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment

Leave a comment

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