Fitch Ratings-Moscow-16 December 2021: Fitch Ratings expects most oil and gas (O&G) companies across all regions to show broadly stable year-on-year performance due to continued financial discipline, supporting a neutral global sector outlook in 2022. Keeping costs and debt under control will remain a priority for most O&G companies. We expect only a moderate increase in capex, and the level of shareholder distributions will largely depend on oil prices.
The situation in commodity markets remains highly uncertain given that Covid-19 infection waves continue, but most hydrocarbon producers will continue to demonstrate financial discipline and generate fairly strong cash flows. Global oil demand has almost recovered to pre-pandemic levels due to vaccinations and eased mobility restrictions, but the emergence of new Covid-19 variants may dent demand. We expect OPEC+ to manage supply to avoid large surpluses or deficits, while the responsiveness of US shale production to oil prices will decline. Many O&G companies will continue to explore low-carbon opportunities in light of the energy transition.
Operating cash flows of global O&G companies will be broadly stable in 2022-2023. We expect cumulative annual capex across our global portfolio to increase by 17% yoy in 2021 (after falling by 21% in 2020) and by a modest 3% yoy in 2022, with around a half of companies keeping capex materially lower (by 10% or more) than 2019 levels.
Only 30% of companies will materially increase their dividends in 2022 and 2023 versus 2021, reflecting our moderating oil price assumptions, but some companies could also implement share buy-backs. We project more than 70% of companies in our portfolio to generate positive or broadly neutral post-dividend free cash flow in 2022, compared to just over 50% in 2018-2019.
Source: https://www.fitchratings.com/research/corporate-finance/financial-discipline-supports-global-oil-gas-sector-outlook-16-12-2021