OREANDA-NEWS. Fitch Ratings says in a new report that the standalone credit profiles of rated South-East Asian oil and gas companies will weaken in 2016 due to sustained low oil prices. Fitch expects the standalone rating headroom for these issuers to shrink because oil prices continue to be low and they are unable to make further large capex cuts due to declining reserves. State linkages will, however, buffer the ratings of these entities.

Most South-East Asian oil companies have announced capex reductions in light of sustained low oil prices. A material reduction in investment in upstream assets is, however, unlikely to be sustained over the medium term because of its impact on future production. Low oil prices will provide acquisition opportunities for companies in the region, although the challenge will be to find immediately earnings-accretive production assets at acceptable valuations.

Energy price reforms to-date in Indonesia, Malaysia and Thailand have generally been neutral to marginally negative for the stand-alone credit profiles of rated state-linked issuers in these countries.