LONDON (Alliance News) - Moody's Investors Service on Wednesday said the outlook for the oil and gas sector will be stable going into 2019 as earnings growth slows.
Moody's said earnings and cash generation will be curtailed by rising investment in low carbon energy businesses, such as liquefied natural gas, as well as increased dividend payouts.
However, the ratings agency did say this investment will be relatively small, and added free cash flow generation in 2019 will remain positive for the sector.
Alongside higher, or re-introduced, dividends, share buybacks will return, mergers and acquisitions will be back on the agenda, and capital expenditure will increase.
Sven Reinke, a senior vice president at Moody's, said: "Our stable outlook on the global oil and gas sector reflects a likely decline in earnings growth to mid-single digits next year based on our oil price assumption of USD69 per barrel in 2018 and USD60 in 2019."
"While declining earnings growth and rising dividends will limit the potential for most oil and gas sector players to strengthen their credit quality, many companies' financial profiles have already recovered to levels seen before the large prolonged drop in oil prices starting in late 2014," Reinke added.
Brent was quoted at USD82.13 a barrel on Wednesday morning, having hit four-year highs on Tuesday. The price is up 23% so far in 2018.
Moody's expects the credit profiles of the likes of Royal Dutch Shell PLC and BP PLC to be able to withstand oil price volatility due to cost cuts, restrained spending, and previous asset disposals.
London-listed oil majors Shell and BP have Aa2 stable and A1 positive credit ratings from Moody's, respectively.
