Moody Predicts That The Oil and Gas Industry Will Remain Bleak

oil price drop

Today, Moody announced that the outlook for the oil and gas industry will continue to look bleak into the beginning of next year. A report released, unfortunately showed that the decline in oil price will mean that cash flow in the oil and gas industry will reduce by at least another twenty per cent in 2015. However, it is not all doom and gloom as a slight recovery has been predicted for next year.

Moody explained that further reductions in cash flow should be expected because of the drop in the price of crude oil. The oil industry has taken a massive hit this year as prices of oil have reduced by more than fifty per cent when compared to the previous year.

Moody has also predicted that the oil and gas industry will likely be in a negative free cash flow position for the remaining part of 2015. In the year 2014, the industry’s negative free cash flow position was at twenty six billion united states dollars. 2015 is looking to end on eighty billion united states dollars. Quite a dramatic difference.

Unfortunately in 2016 continuing cuts are also looking likely. The oil and gas industry will have to further reduce capital spending in order to survive.

Moody expects the total debt load in the oil and gas industry to increase. Many companies will experience declining cash balances and will have to sell their assets in order to make it through the crisis.

It has been announced that some of the more well known oil and gas companies, such as Chevron, Statoil and Shell will be most affected by debt increases. But, they are in a strong position to take on the increase.

But, there is some good news. It has been said that margins and operating costs could return to normal by the end of 2016.

MoodyThe Senior Vice President of Moody, Thomas Coleman issued the report and explained that since the end of 2014, the organisation have had to decrease their oil price outlook many times.

Thomas Coleman said: “We expect oil and gas prices to stay near recent low levels well into 2016.”

Moody’s Corporation is both a credit rating agency and a provider of financial analysis software and services. It was founded in 1909 by John Moody and aimed to provide stats and bond ratings.