Fitch: Increasing risk for Polish oil sector

Fitch Ratings said the Polish oil refining sector has limited financial capacity for substantial investments in the oil exploration and production segment given the sector's large capital expenditure plans primarily allocated to refinery upgrades and additional refining capacity in the next five years.

The agency said it believes that any substantial investments in exploration and production may increase credit risk for the sector unless the capital structures of the two Polish refining companies, Polski Koncern Naftowy Orken SA (rated BBB- with negative view) and Grupa Lotos SA are improved or their capital expenditure programs are reduced.

While increasing operations in the upstream segment may lower business risk for an oil refining company by way of vertical integration, Fitch said the risk of overpaying for exploration and production assets has increased in the current environment of elevated crude oil prices.

The drive to acquire oil production assets to meet ambitious integration targets poses a serious credit risk in this environment, the agency said.

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