OREANDA-NEWS. March 16, 2015. Despite cheap financing conditions and a still-healthy investor appetite for corporate bonds, the lower price of oil could tilt down corporate bond issuances in Latin America for the remainder of 2015, according to Fitch Ratings.

International debt capital market issuances are expected to be lower during 2015, mainly as a result of the expected lower activity in the oil and gas industry. Oil and gas companies accounted for approximately 45% and 41% of total amounts issued by Latin American corporates in 2014 and 2013, respectively. Importantly, issuances tend to lag the actual spending of capex programs.

Latin American national oil companies (NOCs) will maintain high capex levels throughout 2015, given limited short-term investment flexibility. Fitch forecasts that aggregate investments for the rated NOCs in Latin America will remain high and yet probably below initial estimates of approximately USD90 billion in 2015, down 10% compared with USD100 billion in 2014. This amount could face incremental pressures as NOCs find limited financial options and internal cash flow generation is not sufficient to fully fund investments. NOCs, namely Petroleo Brasileiro S.A. (Petrobras), will likely seek financing from Banco Nacional de Desenvolvimento Economico e Social (BNDES) or through government guaranteed lending and avoid accessing the debt capital markets and minimize cash burn.

Fitch expects private oil companies to more quickly adjust their upstream budgets. Pacific Rubiales has reduced its 2015 capex program from USD3.5 billion to a range of USD1.1 billion-USD1.3 billion and Fitch believes this will likely come in lower if current depressed global oil prices are sustained for the entire year. Further reductions in the industry are likely, with Petroleos Mexicanos (Pemex) the possible exception in the region. Pemex issued USD6.0 billion of debt in the international markets in January 2015 and expects to increase capex for the year.