Fitch: Repsol view to negative

Fitch Ratings said it revised Repsol, SA’s and Repsol Oil & Gas Canada Inc.’s outlooks to negative from stable.

The agency also said it affirmed Repsol’s long-term issuer default rating at BBB and Repsol Oil’s at BBB-.

The outlook revision reflects an expectation that weak oil prices will result in Repsol’s financial leverage being higher than previously assumed, Fitch said.

The agency said it lowered the oil price deck in February 2016 and forecast Brent to average $35 per barrel in 2016 before gradually recovering to $45 per barrel in 2017, $55 per barrel in 2018 and $65 per barrel in the long term.

The expectation for improved credit metrics also is conditional on successful implementation of management’s plans to improve its financial performance and reduce debt, Fitch said.

The ratings are supported by the company’s sound business diversification with a strong downstream segment and more geographically diversified upstream segment after the acquisition of Talisman, the agency said.

The ratings are constrained by high leverage relative to peers and uncertainty over the profitability of upstream production, mainly in North America and the North Sea, Fitch added.

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