Fitch: U.S. Refiners Stable in 2016
The credit profiles of North American refiners should remain insulated
in 2016, anchored by strong balance sheets and cash flow, according to
Fitch Ratings' 2016 Outlook. The agency expects the sector and its
ratings to remain stable next year.
'U.S. refiners continued to enjoy the benefits of strong crack spreads,
and excess cash flow has primarily been used for share buybacks and
dividend increases,' says Brad Bell, Associate Director. 'But
investment-grade balance sheets are in good shape, and we do not expect
shareholder-friendly activities to affect credit profiles in 2016, as
they can quickly be curtailed if profitability begins to suffer.'
Demand for product exports will be a key issue to watch in 2016 as it
continues to bolster U.S. refinery utilization and will help to reduce
elevated crude inventories. Increasing global refining capacity could
lead to increased competition in international markets, pressuring
margins on exports. However, Fitch believes the U.S. will remain
competitive in international markets given its structural cost
advantages, primarily low U.S. natural gas and power prices.
Other key issues to watch in 2016 include:
--Evolving crude slates and role of imports: the potential for increased
volatility between crude grades could make imports and logistics
capabilities more important for maintaining profitability;
--Domestic gasoline demand: increases in U.S. vehicle-miles driven and
transport demand should keep gasoline demand steady and help to offset
fuel mileage efficiency gains;
--Dropdown opportunities: refiners with master limited partnership (MLP)
subsidiaries may benefit from their more stable cash flows, ability to
self-fund, and availability as a funding lever for sponsors.
The full report, '2016 Outlook: North American Refining,' is available
or by clicking on the link.
Additional information is available at www.fitchratings.com
2016 Outlook: North American Refining (With Ample Global Supply, Focus
on Product Demand, Exports)
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Copyright Business Wire 2015
Source: Business Wire
(November 23, 2015 - 3:11 PM EST)
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