Moody’s has placed a host of Chinese national oil companies and their captives on review for downgrade.
The companies include China National Petroleum Corporation (CNPC) and various subsidiaries of Sinopec, while the captives include CNPC Captive Insurance Company Limited.
The CNPC captive was established in December 2013, as the first captive insurance company in China.
The ratings reflect the actions taken on many energy companies by Moody’s and its effort to recalibrate the ratings in the energy portfolio to align with fundamental shift in the credit conditions of the global energy sector.
According to Moody’s, oil prices have deteriorated substantially and have reached nominal price lows not seen in over a decade. Moody’s noted that it sees a substantial risk that prices may recover much more slowly over the medium term than companies expect, as well as a risk that prices could fall lower.
Lower oil prices will further weaken the cash flows of exploration and production companies including CNPC and Sinopec Group, which will result in further deterioration in their key financial ratios.
The review includes an assessment of the companies’ ratings positioning against its global peers. Moody’s will also consider the level of support the Chinese national oil companies could receive from the Chinese government, rated Aa3 stable.
