Page 18 - MEOG Week 43

MEOG NEWS IN BRIEF MEOG

June 2020.
Fitch expects weak results in Q3 due to
a still challenging macro environment as
European refining margins remained negative
throughout the quarter.
Fitch assumes Tupras’ 2020 EBITDA
(pre-current cost of supply adjustment) will
decrease 80% y/y.
The difficult operating environment
will push funds from operations (FFO) net
leverage to 17.3x in 2020, up from 4.0x in
2019, according to Fitch’s forecasts.
machine learning platform to broaden Chevron had begun streamlining its High leverage in 2020 increases the risk of
governance framework, quickly detect risks, operations at the end of 2019 when investor Tupras breaching its covenants on residuum
increase protection levels while accelerating pressure was mounting on oil producers over upgrading project loans. Should this happen,
inspection capabilities. their abysmal returns. Fitch expects banks to grant Tupras waivers
ITP REUTERS due to the temporary nature of the breach.
The US Energy Information Agency (EIA)
Chevron to lay off about Fitch downgrades Tupras expects oil consumption to remain 11%
y/y lower in Q3. Overall, the EIA forecasts
25% of Noble employees to four notches below European oil demand will be 12% y/y lower in
2020 and 5% lower in 2021.
after merger investment grade remains challenging, amplifying downside
The coronavirus pandemic in Europe
Chevron Corp will lay off about 25% of Noble Fitch Ratings has downgraded Turkiye Petrol risks, Fitch noted.
Energy’s employees who joined the oil major Rafinerileri A.S. (Tupras) by one notch to ‘B+’, Refiners are usually able to manage
after its $4.1 billion purchase of the smaller four notches below investment grade, with a foreign-exchange risk as oil supplies are
rival earlier this month, the company said on Negative outlook, the ratings agency said on denominated in US dollars while product
Tuesday. October 26. prices, albeit sold in local currency, are driven
The job cuts, which are on top of Chevron’s Fitch has Turkey’s sovereign rating at BB-/ by international US dollar-denominated
plan to cut 10%-15% of its workforce, come Negative, three notches below investment benchmarks.
after the company promised to lower its grade. Nevertheless, due to the exceptionally high
operating expenses by $1 billion this year in Moody’s Investors Service sees Tupras at volatility of the Turkish lira in 2020, Tupras
the face of sharply lower energy demand. B2/Negative, five notches below investment reported foreign-exchange losses in other
Most of the cuts will take place this grade, in line with the sovereign downgrade operating and financial items of TRY1.4bn for
year, Chevron said. Noble had about 2,300 of Turkey. H1.
employees at the end of last year. Koc Holding, Turkey’s largest Although the majority was unrealised
Chevron’s purchase of Noble boosted its conglomerate, controls 51% of Tupras via (TRY1bn), the volatility in the exchange rate
investments in U.S. shale patches of Colorado subsidiaries. The remaining 49% is free-float. provides a downside risk to Fitch’s forecasts.
and the Permian basin and gave the company Turkey’s privatisation administration has one Tupras’ FX-denominated debt accounted
a foothold in Israel through Noble’s flagship golden share. for 93% of total debt at end-June 2020, while
Leviathan project, the largest natural gas field Fitch’s latest downgrade reflects cash flow 39% of cash balances was denominated in FX.
in the eastern Mediterranean. generation that is weaker than previously Fitch expects no dividend from Tupras
The deal came at a time when drilling had forecast and high leverage, due to historically until 2023.
been decimated by the coronavirus crisis, low refining margins caused by demand loss Tupras maintains a leading position in
and since then oil producers across North for fuels amid the coronavirus pandemic. the Turkish oil refining market and operates
America have continued to consolidate in The Negative outlook reflects uncertainties one of the most complex sets of refineries in
hopes of surviving the downturn. related to the rebalancing of the fuel market EMEA.
The company, which took a $1 billion in the next 12-18 months, which may cause Tupras remains focused on refining
charge earlier this year to cover severance additional rating pressure for Tupras. and has little integration across the value
payments, has also been in the process of Earlier this month, Tupras revised its chain compared with Hungarian oil and
asking employees worldwide to reapply expectation for its net refining margin to gas company MOL and Poland’s PKN
for their positions as part of a cost-cutting USD1 per barrel in 2020 from $3-4 per barrel. Orlen, which are diversified into upstream,
program, Reuters reported earlier this month. New forecasts assume also fuel production petrochemicals and retail.
As part of the plan, Chevron also plans to of 22 million tonnes (mt), down by 8% Tupras’ 40% stake in Opet, Turkey’s
lay off more than 50 employees starting Dec. from 24mt previously forecast and capacity second-largest fuel retailer, only partly
14 in both its Bakersfield production unit and utilisation of 75%-80%, down from 80%-85%. mitigates this lack of integration, which
the El Segundo refinery, according to a notice Tupras reported negative ebitda of Turkish increases Tupras’ earnings volatility through
the company sent to the state of California. lira (TRY) 0.8bn in H1, down from a positive the cycle.
About 700 employees will lose jobs in TRY2.3bn a year ago, on low demand and Fitch forecasts average Brent oil prices at
Houston starting this month, according to a capacity utilisation as it was forced to suspend $41 per barrel for this year.
filing with the Texas state. production at its Izmir refinery in May and BNE

P18 www. NEWSBASE .com Week 43 28•October•2020