Earnings before tax and depreciation (EBITDA) of the global oil and gas industry will be flat through to June next year and capital spending is likely to further decline, according to Moody’s.
After an almost 70% drop in aggregate EBITDA in the second quarter of the fiscal year, the industry’s operational performance will likely see a gradual and uncertain recovery due to pandemic.
Although oil and gas companies’ downstream operations will benefit from rising demand for refined products after the second quarter trough, the demand will likely remain weaker than year-ago through 2021.
“Our assumption is that oil prices will remain around $40- $45 per barrel in 2021, well below pre-pandemic levels, and volumes will remain largely flat through the end of June 2021,” said Moody’s.
Most oil and gas companies had already planned to cut costs even before the pandemic began and have subsequently accelerated these efforts, which will bolster their earnings in the next 12 months, it added.
However, companies may not be able to sustain some of these additional savings once oil prices meaningfully increase, according to Moody’s,
In the next three to five years oil and gas companies are also likely to accelerate their efforts for carbon transition, it added.