March 10, 2020 / 12:45 PM / 18 days ago

S&P Global slashes oil price assumption to $40, warns of major downgrades

FILE PHOTO: Oil pours out of a spout from Edwin Drake's original 1859 well that launched the modern petroleum industry at the Drake Well Museum and Park in Titusville, Pennsylvania U.S., October 5, 2017. REUTERS/Brendan McDermid/File Photo

LONDON (Reuters) - Rating agency S&P Global slashed its average Brent oil price assumption for the year to $40 per barrel on Tuesday and warned that some junk-rated oil and gas firms could face multi-notch downgrades to their credit scores.

S&P had previously expected Brent to average $60 this year $60 previously. It also cut its forecasts for next year to $50 from $55 and its Henry Hub gas price assumptions for this year to $2 per million British Thermal Units from $2.25 previously.

“It’s likely rating actions (for oil and gas production companies) in the investment-grade category could be more severe than during the last cycle,” S&P said, adding that it would review all its exploration and production and oilfield services ratings over the next several weeks.

“For the high-yield segment, in particular, issuers without hedges, those who face upcoming maturities, and are somewhat squeezed on borrowing-base revolving credit facilities will most likely face multiple notch downgrades,” it added.

Reporting by Marc Jones; editing by Karin Strohecker

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