S&P downgrades Tullow Oil amid low oil prices

Jessica Morris
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Standard & Poor's headquarters in the fi
S&P has lowered its oil price forecasts (Source: Getty)

Standard & Poor's downgraded Tullow Oil due to the credit ratings agency's forecast for oil prices to remain lower for longer.

Standard & Poor's (S&P) lowered Tullow Oil to "B" from "B+" and placed it on negative watch, which means it could be subject to further downwards revisions.

Other UK-based companies that had their credit ratings chopped include Enquest, Ithaca Energy and Nostrum.

S&P recently lowered its forecasts for oil and gas prices due to ongoing over supply in the global oil market. The black stuff has already lost around 70 per cent of its value over the last 18 months.

Read more: Tullow Oil's losses narrow

It warned oil companies could experience stress when one strategy they use to combat low oil prices runs out.

"While oil prices are weak ... operating cash flow and credit metrics may not deteriorate to the same extent given favourably priced hedges for several, but not all, issuers," S&P said.

"Conversely ... we would foresee for those companies who have been protected by hedges declining profits and credit metrics in 2017 as hedges run off."

It flagged tougher markets for oil and gas loans as another potential pressure point. This will make it harder for some energy companies to refinance their debt over 2016 to 2017.

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