Moody’s revises Origin Energy to negative

Moody's Investors Service said it revised the outlook of Origin Energy Ltd. and Origin Energy Finance Ltd. to negative from stable.

At the same time, the agency affirmed Origin Energy’s Baa3 issuer and senior unsecured ratings and P-3 short-term issuer rating.

Origin Energy Finance’s Baa3/provisional Baa3 senior unsecured and Ba2 preference stock ratings were also affirmed.

Moody’s said the actions follow the sharp reduction in its central oil price scenario – a key driver of the company's financial performance given the large contribution of oil-linked LNG exports to its earnings base – in light of the continuing oversupply in the global oil markets.

The agency now assumes the Brent crude oil price to average $43 per barrel and $48 per barrel in 2016 and 2017, respectively, a $10 per barrel and $12 per barrel reduction from its previous scenario.

"The negative outlook reflects our expectation that Origin's financial metrics will be weaker than previously anticipated, a consequence of the material reduction in earnings from its 37.5% equity interest in Australia Pacific LNG (APLNG) under lower oil prices," Moody's vice president and senior analyst Spencer Ng said in a news release.

"A failure of oil prices to recover from prevailing low levels also increases the possibility that Origin and its fellow shareholders will need to provide further capital contribution to APLNG, which may further increase consolidated leverage."

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