Fitch Ratings has published a new report on the Latin American Oil & Gas Netback profiles of regional issuers.
Fitch-calculated half-cycle costs for most Latin American integrated oil and gas companies have generally remained below market prices and those of independent players are at or above current prices. The gap between prices and costs has almost vanished with WTI prices of $30 per barrel (bbl) and the average implied half-cycle cost for companies in the region at approximately $24 per barrel of oil equivalent (boe) during 2015. Fitch sees productions costs for players as average when compared with global peers.
Fitch sees that full-cycle costs, defined as the sum of production, interest, taxes and capital costs with a 15% return on capital, are currently above market prices for all of Latin American oil and gas companies. WTI was $30/bbl during recent weeks. The average implied full-cycle oil price break-even for companies in the region has come down to approximately $52/bbl in 2015 from approximately $68/bbl in 2014.
Geopark and Pacific find themselves at the highest risk due to low energy prices with Pacific already announcing interest payment suspension at the beginning of 2016. PDVSA is also at high risk of financial distress given its relatively high half-cycle costs. Petroleos Mexicanos (Pemex) and Ecopetrol S.A. seem to be in the best position to weather the current low oil price environment and Petroleo Brasileiro S.A. (Petrobras) and YPF S.A. continue to benefit from price controls in their respective markets.