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S&P cuts Shell's credit rating

01 Feb 2016 19:00 GMT
S&P cuts Shell's credit rating

London, 1 February (Argus) — Ratings agency Standard & Poor's (S&P) has cut Shell's credit rating, after a revision of its oil and gas price assumptions.

Shell's rating has been cut by one notch to A+/A-1 from AA-/A-1+, reflecting "much weaker forecast credit metrics over 2016-18 and a slower pace of credit metrics and profit improvements, combined with significantly negative cash flows after dividends and capital expenditure until 2017", S&P said.

The cut does not include Shell's around $50bn cash-and-shares takeover of UK energy firm BG, which received shareholder approval last week. S&P said completion of that deal "could result in a further one-notch downgrade given the significant additional debt burden and the uncertainty surrounding this transaction's returns".

S&P also placed its ratings on BP, Total, Italy's Eni, Spain's Repsol and Norway's state-controlled Statoil on review and said there is a significant likelihood of one-notch downgrades for several of them.

S&P assumes Brent at an average $40/bl for the remainder of this year and $45/bl in 2017 and said core debt coverage metrics of many companies are likely to remain below its rating guidelines "for two or three years as the industry adjusts to lower prices".

Ratings agencies Fitch and Moody's have also reviewed their ratings on the European oil sector in recent weeks.

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