Any future rating upgrades for EMEA oil and gas majors are contingent on structural improvement of business profiles to address energy transition risks and a permanent reduction of gross debt, Fitch Ratings says in a new report. Low gross and net leverage levels and high cash buffers are providing high levels of headroom under their ratings, but companies will need to execute their energy-transition strategies in a commercially viable manner, and balance these ambitions against the need to secure energy supply during a volatile geopolitical backdrop.

Shell plc (AA-/Stable), TotalEnergies SE (AA-/Stable), BP plc (A+/Stable) and Eni SpA (A-/Stable) continue to achieve very strong cash flow due to high-but-normalising hydrocarbon prices and downstream profitability, supporting the companies’ already very low leverage. However, Fitch expects that the majors will need to demonstrate continued focus on prudent capital allocation, cost discipline and the longer-term challenges and opportunities presented by the energy transition as prices continue to fall.

An increasingly tense global geopolitical landscape also requires that issuers balance the security of energy supply with their energy-transition ambitions in the context of global energy policy. We do not expect a large-scale resetting of long-term emissions targets, despite likely changes to issuers’ short-term transition plans.
Source: Fitch Ratings