Moody’s upgrades energy sector outlook on strong oil prices

The outlook for the global energy industry is growing brighter thanks to rising earnings expectations, says Moody’s Investors Service.

The rating agency announced that it upgraded its outlook for the global energy sector to positive from neutral, as elevated commodity prices are expected to boost corporate earnings in the year ahead.

Within the sector, Moody’s expects exploration and production companies to generate “record profits and free cash flow” in 2022, as firms benefit from strong commodity prices and continue to exercise spending discipline.

Additionally, the rating agency said that most integrated oil and gas companies will enjoy significant earnings increases this year. And it sees refiners’ earnings growing in 2022.

“High prices for oil and especially natural gas will boost earnings and credit quality significantly for [oilfield services] companies through 2023, with the smaller onshore service companies in North America set to see the most substantial growth in earnings,” Moody’s said.

The rating agency said it expects supply constraints to keep prices high over the next 12–18 months.

“The pace of improvement in earnings will slow by early 2023, while commodity prices will remain well above our medium-term price ranges,” said Elena Nadtotchi, senior vice-president with Moody’s, in a release.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.