Moodys stressed that the Creole barrel will increase revenues and improve debt of the provinces and oil companies

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He also stated that it is positive for those who produce in the Neuquén field of Dead cow, because he remarked that “the new reference price of crude exceeds the equilibrium production values ​​of between $ 35 and $ 40 a barrel, for unconventional projects “in that area.

“The measure will increase the revenues of the oil-producing provinces such as Chubut, Tierra del Fuego, Mendoza and Río Negro, all of them with a negative Ca rating from the consultancy- because they receive royalties calculated as a percentage of the oil traded and gas production , valued at the wellhead price “, Moody’s indicated.

In a report on the restoration of the Creole barrel in Argentina, he highlighted that “The oil-producing provinces obtain a relatively high part of their income, from hydrocarbon royalties.”

The report indicated that “the reference price of national crude will increase royalties to the provinces, which have been negatively affected by the recent drop in international oil prices. “

He pointed out that “the oil-producing provinces like Chubut and Tierra del Fuego depend largely on royalties, “because he remarked that”This revenue stream serves as collateral for your international foreign currency promissory notes. “

He specified that “royalties are paid in local currency at the dollar exchange rate, which provides a natural hedge to the debt denominated in dollars of the provinces.”

He explained that “in the current context of significant depreciation of the currency, foreign currency hedges are a substantial credit consideration. “

“Both Chubut and Tierra del Fuego had strained liquidity positions and weak financial metrics before the drop in oil prices. Therefore, a further deterioration in the cash flows of royalties would have had serious negative effects on the credit quality of these provinces, “said Moody’s.

He stressed that “by isolating domestic prices of crude oil from international prices, which are currently below the historical average, the government will support the royalty income from the provinces. “

It also indicated that “the decision is positive in terms of evaluating the credit profile of the oil-producing companies,” and stressed that “the prices obtained for both local sales and exports increase, because the decree also reduces export taxes. “

The analysis considered that “The Government seeks to support investment and general activity in the sector, preventing net energy imports from growing in the future, a path that goes against the goal of energy self-sufficiency. “

“The measure supports exploration and production activity in general, and unconventional production in particular, since unconventional production carries higher equilibrium costs,” the ratings agency said.

He indicated that the decision “imposes certain restrictions on imports to protect local refiners from foreign competition”, and stressed that “it freezes taxes on liquid fuels and carbon dioxide until October 1, instead of indexing them to inflation every three months as usual. “

In this regard, he specified that “taxes represent more than a third of the fuel prices at the pumps.”



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