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Australian company Woodside Petroleum is among a large number of big players in the oil and gas industry worldwide who have been told their credit rating could be downgraded because of global volatility and the continued move away from fossil fuels.
The warning was issued by Standard and Poor’s, commonly known as S&P, which is one of the world’s ‘big three’ credit rating agencies. The better a company’s credit rating is from a ratings agency, the easier and cheaper it is to access loans.
S&P has told 13 oil and gas companies that it may downgrade them within weeks because of increasing competition from renewable energy.
Among those who could be downgraded are household names such as Shell, Mobil, Total, Exxon and Chevron. Four Chinese producers are also included.
Perth-based Woodside Petroleum is the largest oil and gas producer in Australia and is ranked by Forbes business magazine as1,328th-largest public company in the world. It employs more than 3,000 people and had 2019 revenue of almost US$5-billion.
As the news broke yesterday (Wednesday) morning, Woodside’s share price fell by more than 3 percent on the Australian Securities Exchange (ASX).
In a statement, S&P said it had increased its risk rating for the entire oil and gas sector from ‘intermediate’ to ‘moderately high’ due to the move away from fossil fuels, poor profitability and volatile prices.
“In particular, we note significant challenges and uncertainties engendered by the energy transition, including market declines due to growth of renewables; pressures on profitability … and recent and potential oil and gas price volatility,” the agency said.
The statement also mentioned “the potential for negative surprises after the Covid-19 impacts in 2020.”
The global pandemic and its associated worldwide lockdowns has reduced demand for oil from most sectors of the economy. Motorists are travelling less, the aviation sector is near to collapse, factories are operating at lower levels, and global shipping has slowed significantly.
BlackRock, the world’s biggest investment fund manager, said this week it may sell its shares in the worst corporate polluters – including oil and gas producers – in a bid to support the goal of net zero carbon dioxide emissions by 2050.