Fitch Ratings expects a favorable oil and gas environment for Latin American issuers in 2023, despite expectations of lower energy prices. YTD Brent oil price average of /bbl, is close to 50% higher than the /bbl average of 2021. A continued increase in production in 2023 should bode well for issuers in the region even if prices converge to Fitch’s long-term price deck of /bbl.
“Latin American energy companies will enter 2023 with stronger capital structures and positive production momentum following a robust recovery in prices and production in 2021 and 2022. Fitch expects credit metrics will remain on average at 2022 levels, as most issuers took advantage of favorable price environment to bring debt down to comfortable levels. Fitch will watch closely pressures on cash flows for Colombian issuers as a result of the tax, and government support for Pemex and Petroperu,” affirmed Adriana Eraso, Director at Fitch.
Fitch forecasts that, on aggregate, production will increase across the portfolio of rated issuers in 2022 and 2023, supporting Stable Ratings. Fitch forecasts production from rated entities to grow in aggregate by approximately /d and /d in 2022 and 2023, respectively, compared to 2021 levels. The combination of slightly higher forecasted production and moderating price levels supports our Neutral Outlook for the sector. In addition, the supportive price environment of 2022 allowed companies to deleverage, and further enhance credit and liquidity positions, supporting the Neutral Outlook.
Fitch maintains a Neutral Outlook for the Latin American Oil & Gas sector. Fitch expects most issuers will continue to strengthen their capital structure in the short to medium term supported by strong cashflows and reduced or maintained debt levels. All the companies that were on Negative Rating Outlook in 2020 have moved to Stable Outlooks in 2021 and 2022.
