Mubasher: As commodity prices continue to slide, the global oil and gas industry will reduce capital spending and work toward leaner budgets in 2016, said Moody's Investors Service.
"Excess supply will continue to drag on commodity prices in 2016 in the global oil markets and the US natural gas market," said Steven Wood, Moody's managing director.
"Furthermore, the potential lifting of sanctions against Iran could bring even more supply to the market in 2016, offsetting any expected declines in US production," he added.
Low commodity prices have led to deterioration in cash flows and liquidity, straining the already limited financial flexibility of speculative-grade oil and gas companies.
Even large, diversified investment-grade companies will struggle with diminishing financial flexibility and increasing financial leverage.
The agency expects upstream capital spending to drop by at least 20%-25%, leaving the oilfield services and drilling industry the most stressed sector in 2016.
Integrated and national oil companies will cut capital spending and thus lower capital budgets in 2016, but oilfield services and drilling companies in particular will emphasize cost reduction as they adjust to reduced demand.
