Fitch cuts Shell’s credit rating after BG takeover

Credit rating agency Fitch downgraded Hague-based LNG giant Shell following its $53 billion acquisition of BG Group.

Fitch downgraded Shell’s Long-term Issuer Default Rating to ‘AA-‘ from ‘AA’. The outlook is negative, the agency said in a statement last week.

Shell completed the BG acquisition on February 15, creating the world’s largest liquefied natural gas company.

“Using Fitch’s latest Brent price deck of USD45 per barrel (bbl) in 2016, USD55/bbl in 2017 and USD60/bbl in 2017, we forecast that the combined group’s funds from operations (FFO) net adjusted leverage will peak at end-2016 at under 2.5x before moderating to 2.1x at end-2017, and gradually to 1.9x-2x in 2018-2019, ie, to the upper leverage range of our ‘AA-‘ rating guidance,” Fitch said.

According to Fitch, the negative outlook reflects risks stemming from Shell “materially missing the targeted level of asset disposals in a competitive market environment, expectations of fairly stable dividend payouts, increase in leverage due to recurring negative free cash flow (FCF), lower oil prices and weaker cash generation”.

LNG World News Staff