Moody’s downgrades Inpex of Japan

Credit rating agency Moody’s said Wednesday it has downgraded Inpex Corp’s credit rating.

Moody’s downgraded Japan’s Inpex rating to A2 from A1, and said the outlook on the rating was negative.

The downgrade principally reflects  Moody’s expectation that the company’s profitability will “deteriorate significantly as a result of sustained low oil prices” .

“The company’s weakened profitability, combined with rising adjusted debt related to the company’s major Ichthys LNG project, in turn will weaken its key credit metrics over at least the next 18-24 months and likely past this point,” Kailash Chhaya, a Moody’s Vice President said.

Moody’s said it sees a substantial risk that oil prices may take several years to rise or that they might fall even further.

Even under a scenario of a modest recovery from current price levels, E&P companies globally can expect a “deteriorated financial profile with much weaker cash flows“. Such risks are incorporated in the negative outlook on Inpex’s rating, Moody’s said.

The rating outlook could stabilize in the event that Inpex “successfully completes the Ichthys project, combined with expected improvements in retained cash flow,” Moody’s added.