Business & Investment

U.S. oil major downgraded by S & P on climate risk and earnings

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Exxon Mobil Corp., Chevron Corp., and ConocoPhillips have downgraded their credit ratings after S & P Global Ratings has revised its industry risk profile due to climate change and low earnings following a recent warning.

In another statement, S & P downgraded oil and gas producers by one notch, two weeks after rating agencies released a sector-wide report on the challenges posed by climate change.

S & P reflected on February 11th, “Increased risk from energy conversion due to climate change and carbon / GHG emissions, low industry profitability, and expected increased volatility of hydrocarbon fundamentals.” ..

The downgrade will take place days after Big Oil made the worst profits in decades, due to the record drop in oil prices last year. Lower ratings do not immediately affect a company’s access to credit or the cost of capital, but highlight the challenges the industry faces as oil prices recover, especially when it comes to approaching climate change.

The industry has taken several steps to survive the energy shift, but “I don’t think these strategies will bring significant credit differentiation,” S & P said.

According to S & P, tighter regulations and changing demand patterns “may contribute to a more difficult business environment for fossil fuel producers and increase the risk of stranded assets and significant asset valuation losses.”

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Brent crude oil futures, the international benchmark, rose 17% this year amid growing optimism that the worst damage to COVID-19 has been in the past and economic growth is ready to recover. However, that alone is not enough to shake S & P, which states that “the expected volatility of hydrocarbon volatility is high.”

S & P has downgraded Exxon’s long-term rating from AA to AA. Chevron has been lowered from AA to AA- with a stable outlook. Conoko decreased from A to A- with a stable outlook.

Exxon’s share price fell 2.5% to $ 49.84 at the end of the deal in New York, while Conoko and Chevron fell 1.7% and 0.5%, respectively. West Texas Intermediate fell 1.2% to $ 57.96 a barrel at 4:43 pm in New York.

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U.S. oil major downgraded by S & P on climate risk and earnings U.S. oil major downgraded by S & P on climate risk and earnings

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