A new Fitch Ratings report has said that Latin American oil and gas companies are going to enter 2014 with a stable outlook. This will be supported by strong underlying assets, and adequate capital structures and liquidity profiles.
‘National oil companies are forecasted to spend US$ 100 billion in 2014 on new investments, generating negative free cash flow and increased leverage. This trend is mitigated by current cash balances, which provide strong liquidity and access to external financing,’ said Lucas Aristizabal, Director at Fitch.
‘Fitch anticipates the rate of growth in demand for oil, and oil products, will probably slow in 2014 for both developed and emerging markets,’ Ariztizabal continued.
Production, refining and investments
Latin American oil companies are actively seeking to aggressively increase production but face challenges in achieving targeted production volumes, including higher cost technology to increase exploration in non-traditional areas, a shortage of offshore drilling equipment, and a tight labour market.
Latin American refining, according to the report, remains exposed to constrained retail prices, with recent reported losses expected to continue in the short term.
Regulation is apparently key to attracting private investment but is varied. Colombia’s solid regulatory framework entices private investment, while Argentina and Venezuela are heavily hampered by their relationship with their domestic governments. In Mexico, private investment stands to benefit significantly from the passing of the energy reform, and in Brazil, increasing government regulation might marginally curb private investors’ appetite.
Adapted from a press release by Claira Lloyd.
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