S&P puts Shell’s credit rating on negative watch

 
Caitlin Morrison
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RATINGS agency Standard & Poor’s (S&P) has placed its credit ratings on Royal Dutch Shell on negative watch, after the company announced its £47bn offer for British gas producer BG Group.

S&P said yesterday that the increase in debt caused by paying a cash consideration of about $20bn (£14m) would likely result in credit measures being consistent with a lower rating for several years.

While it acknowledged that the deal could strengthen Shell’s position in the liquefied natural gas market, as well as increasing production and reserves, the group said the short-term increase in financial risk was “more material for the ratings”.

According to S&P, unless oil prices recover “meaningfully” in 2015, it considers a downgrade of Shell by one notch to “AA-” to be a “clear possibility”.

The ratings agency also said that its long-term rating on BG subsidiary BG Energy was already on watch.

However, it added it was revising “the implications to developing from negative to signal the potential for an upgrade”.

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