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S&P downgrades Shell to A+/A-1; keeps door open to further downgrade

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Commodities | Mon Feb 1, 2016 9:28pm GMT

Credit ratings agency Standard and Poors on Monday downgraded oil major Royal Dutch Shell Plc to A+/A-1 from AA-/A-1+ and put its long-term credit rating on creditwatch negative citing sliding oil prices.

S&P said Shell’s one-notch downgrade, driven by weaker forecasts for its credit metrics over 2016-2018 and slower profit improvements, excluded the ratings impact of its BG Group Plc acquisition.

Shell had said it was prepared for a downgrade as a result of the BG deal.

But S&P said that as that deal was not assessed for the rating action there could be a second downgrade due to Shell’s significant additional debt burden and uncertainty over the returns the transaction will bring.

S&P also put a string of other major European energy companies on creditwatch negative such as BP PLC, Eni SpA , Repsol SA, Statoil ASA, Statoil Forsikring AS, Statoil US Holdings Inc and Total SA .

In April last year, Shell agreed to buy smaller rival BG Group for 47 billion pounds ($70 billion) in a cash and stock deal that valued each BG share at a premium of about 52 percent to BG’s 90-day trading average.

Prior to the acquisition, Shell was seen as one of the best companies in terms of its ability to balance its books and invest and pay dividends from cashflow without borrowing too heavily.

(Reporting by Sangameswaran S in Bengaluru; Editing by Hugh Lawson)


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