S&P downgrades Cnooc

Standard & Poor’s said it lowered the long-term corporate credit rating on China National Offshore Oil Corp. (Cnooc Group), Cnooc Ltd. and Cnooc Finance Corp. Ltd. to A+ from AA-.

The outlook is stable.

The agency also said it affirmed the cnAAA long-term Greater China regional scale rating on the three companies.

S&P also lowered the issue rating on the senior unsecured notes guaranteed by Cnooc Group and Cnooc Ltd. to A+ from AA- and affirmed the cnAAA Greater China regional scale rating on the notes.

The agency also said it lowered the stand-alone credit profile on Cnooc Group and Cnooc Ltd. to A- from A, primarily because oil prices remain depressed and oil price assumptions were revised again by 27% for 2016 and 31% for 2017.

The company is taking various measures to preserve its cash flow in the currently depressed price environment, including cutting back capital expenditure and costs, but such measures are not enough to stabilize its cash-flow adequacy, S&P said.

The agency said it now expects a debt-to-EBITDA ratio of 2.3x to 2.6x for Cnooc Group and about 2.3x for Cnooc Ltd. in 2016 and 2017.

The group is expected to generate marginal free operating cash flows during the next two years, S&P added.

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