“Our analysis of the potential impact of different oil prices and economic growth rates shows that a Brent crude price of $100 per barrel is necessary for the industry as a whole to maintain positive revenue growth in 2014 under US GDP growth scenarios of 1.8%-3.4%.
“Our central forecast, based on market consensus expectations for oil prices and US GDP, is for average sector revenue growth to be flat in 2013, but increasing to 5.5% in 2014 and remaining in single digits in 2015,” Fitch Ratings in a statement said.
“EBITDA growth tends to follow the same trend as revenue growth, but with more volatility. If revenue remains flat in 2014 EBITDA is likely to fall. The impact on cash flow would be moderate for investment-grade issuers, but could be more severe for companies with very low speculative-grade ratings that are more exposed to earnings volatility.
“Falling average sector revenue would therefore probably not affect the ratings of investment-grade companies. Non-investment grade companies are more vulnerable, and in some of the weaker cases rating Outlooks could be revised to Negative if revenues fall steeply.
“Our assessment is based on the revenue impact from a range of potential oil prices and US economic growth rates. The 25% chance of a revenue decline in 2014 is based on the assumption of a normal distribution. For more details on the analysis, see the full report “25% Chance EMEA.”