USA: Fitch Ratings Revises Price Decks for Oil and Gas

Fitch Ratings Revises Price Decks for Oil and Gas

Fitch Ratings has revised its price decks for both U.S. oil and natural gas, reflecting various market factors and underlying conditions.

Fitch has lowered its long-term (mid-cycle) Henry Hub natural gas price to $4.50/thousand cubic feet (mcf) from $5.00/mcf. This drop reflects limited catalysts for higher U.S. natural gas usage and the ongoing strength of shale-based liquids projects in North America, which has resulted in the treatment of associated gas as a by-product in a number of plays, allowing producers to tolerate lower all-in natural gas prices.

Fitch lowered 2012 HH base case prices to $2.75/mcf to reflect weak pricing seen YTD. While recent heat wave conditions have pushed electric generation usage up sharply this summer, this has been balanced against a very mild winter, which has led to average pricing of just $2.43/mcf as of the end of July.

Fitch has raised its 2012 base case West Texas Intermediate (WTI) to $92.50/barrel to reflect near-term market factors, and maintained its long-term base case price at $65/barrel.

Fitch’s price deck intends to reflect a more conservative view of future price levels for modeling and rating purposes and for evaluating future commodity price expectations from a bondholder perspective. Fitch’s price deck will often remain below current spot and future markets as a result. The price deck also reflects just supply/demand fundamentals, particularly the long-term price deck, with the recognition that near-term events can result in significant deviations from fundamental levels.

LNG World News Staff, August 16, 2012