S&P: Lifting U.S. oil export ban will lift sector credit scores
WASHINGTON — Producers, pipeline and storage operators, and oilfield service companies will get a credit ratings boost if the United States lifts its ban on most crude oil exports, the ratings agency Standard & Poor’s said on Tuesday.
Ratings for oil refiners, who have enjoyed the ample supplies of crude flowing from the U.S. shale oil boom, might suffer slightly if the ban is scrapped, the agency added.
S&P said the companies that likely get the biggest boost will be exploration and production operations that benefit from a probable bump in the price of U.S. benchmark West Texas Intermediate crude relative to the international Brent benchmark.
“Overall, we believe producers should reap the benefits as their markets expand and realized prices improve, but any credit improvements will depend on how much incremental debt companies incur for new drilling,” the report said.
The decades-old U.S. law bars exports of domestically produced crude, but shipments to Canada are broadly allowed, as are re-exports of foreign oil.
A growing excess, particularly of light crude, has prompted companies to find ways around the ban, including by processing a super-light form of oil known as condensate to the point where it is considered a refined product.
While many U.S. companies will benefit from the narrower spread, S&P said producers in Texas’ Eagle Ford region, which is awash in light crude and condensates, will be the biggest beneficiaries since that oil sells at a discount to WTI and is located near Gulf of Mexico ports.
Among the larger producers in the Eagle Ford are EOG Resources Inc., Pioneer Natural Resources Co., Penn Virginia Corp. and Marathon Oil Corp.
Oilfield services and pipeline companies will also see a credit rating boost as WTI prices and drilling increases, S&P said.
Unsurprisingly, the report found that refiners will suffer if the law changes because they will no longer be shielded from international competition.
However, S&P said refining companies have enough of a cushion in their ratings that the impact of lifting the ban will be muted.
While the report says coastal refiners will face “headwinds” if the export law is changed, some will be less affected because the discounted crude price from North Dakota’s Bakken region has more to do with infrastructure constraints than the supply glut along the coasts.
S&P said that, if coastal refiners cut back, there could be a squeeze on refined products, potentially raising gasoline prices in the Northeast United States — a political concern for those who favor keeping the ban.