This data book provides a reference guide to the listed oil & gas fixed income securities, and their performance.
Last quarter's cautious recovery has been put in to reverse, with issuance down.
As we highlighted in 1Q, the nascent recovery has been fragile and susceptible to shocks.
Consequently, it is not surprising to see the sector pause in 2Q. Whether this is an aberration or a wider trend is too early to say.
This month is encapsulated by the following key takeaways:
Leveraged Debt
- January 2021 remains the stand-out month for leveraged debt issuance, but this is against a historically weak 2020. We think we think that this has been driven by a state sponsored relaxation in credit criteria, a position supported by the exceptional low level of activity since.
- Nevertheless, when you widen out the scope to the rolling 5-Year issuance, the comparables look less impressive, and 2021 looks like being another weak year.
- Margins remain stable across all instruments, but as would be expected, margin rises with duration.
Listed Debt
- Despite a recovery in issuance in January 2021, the trend has failed to follow the seasonal trend of increasing throughout Q1. While difficult to draw comparisons due to Covid effects, this could be the start of a worrisome trend.
- Ratings distribution remains steady Q-o-Q, albeit showing signs of a deterioration in credit quality. Whether this is due to a deterioration in the sector’s metrics, or the creeping growth in the imposition of abstract ESG measures will be made clear once the effect of higher oil prices feed through.
- Yields have declined Q-o-Q as prices have increased, indicating that in the markets at least, due in part to increased confidence in a higher oil price environment, but also news that capital discipline is now likely to be the key focus for the sector, opposed to production growth.
- The sector maturity profile still causes some indigestion, especially in the context of receding support for oil & gas. Interestingly, however, there seems to be an uptick in ultra-long issuance (>25 years), which suggests that in some quarters at least, there is a belief that the sector has a lot of life yet.
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