OREANDA-NEWS. The aggregate earnings of seven major EMEA oil companies will fall by 22% in 2016, and most integrated firms will see a significant deterioration in credit metrics as weaker downstream performance adds to the impact of lower oil prices on cash flows, according to Fitch Ratings' analysis. The fall in earnings will come after a 34% drop in 2015 and is a severe, but not disastrous decline in the context of a 65% drop in oil prices.

2016 metrics will be weak for current ratings, but our approach is to rate "'through the cycle" and we therefore focus more on 2018, when we expect the cycle to be past its trough, and by which time companies will have been able to adjust their operating profiles to a more challenging oil price environment.

This approach is reflected in the limited rating action since February when we lowered our oil price assumptions to USD35/bbl in 2016, rising steadily to USD55/bbl in 2018 and USD65/bbl in the long term.

We downgraded Shell to 'AA-' in February following our reassessment of its financial profile following its acquisition of BG. The downgrade of Eni to 'A-' in April resulted from weaker credit metrics and a worse-than-expected performance in the gas and power and refining and marketing segments, indicating the company's vertical integration is weaker than its peers'.

Four companies - Shell, Total (AA-), OMV (A-) and Repsol (BBB) - are on Negative Outlooks and their leverage is likely to still be close to our negative rating action triggers by 2018. Maintaining the ratings will depend on companies being able to successfully implement the spending and disposal plans we currently assume, or on a stronger than assumed oil price recovery.

Companies' financial priorities also remain a key rating driver. Integrated players have already announced considerable capex cuts and opex savings. In a USD35/bbl scenario we believe companies will be more flexible with dividends. Companies expecting significant disposal proceeds from upstream assets may see their financial profiles come under pressure if asset sales plans prove challenging to implement. In the current macro environment, agreeing on asset valuation is difficult.

For more information on our forecasts for the sector, including detailed expectations for Eni, OMV, Repsol and MOL, see the report "Updating EMEA Integrated Oil Forecasts - Part 2" published today and available at www.fitchratings.com or by clicking on the link. The publication of the report marks the end of our review of western European oil companies following the price deck revision.