Cenovus Energy Inc. and Encana Corp. had their debt ratings lowered to junk by Moody’s Investors Service as a prolonged crude-price rout saps cash flows.
Moody’s cut the ratings of senior unsecured notes for Canadian producers three steps to Ba2, or two levels below investment grade, from Baa2, based on separate statements Thursday. It also reaffirmed the Baa2 rating of Husky Energy Inc., keeping the Canadian producer’s debt investment grade.
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The ratings moves be analysts and energy companies brace for that potential of affordable prices for longer inside a downturn which has already extended about Twenty months. Moody’s reduced its outlook for oil in January for the second time in per month, citing a persistent global glut and weaker demand in China. U.S. crude prices hovering around US$30 a barrel are down about 70 per cent in the high in mid-2014.
The actions resolve reviews by Moody’s started in December. While ratings cuts is visible as lagging indicators that follow bond-market pricing, there can be implications for borrowing costs. Many funds can’t hold high-yield notes, so a cut from investment grade to junk could trigger a wave of promoting.
Bloomberg News
