Although affirming its Aa2 issuer rating on Royal Dutch Shell PLC, Moody's has lowered its outlook on the Anglo-Dutch supermajor, from stable to negative, due to the recent collapse in commodity prices and the impact that will have on the company's financial metrics this year, the rating agency said April 1.
"While we expect that Shell's strong liquidity and financial flexibility as well as a normalization of oil and gas prices, will support a recovery of its credit metrics in 2021-22, we consider it less certain whether our requirements for an Aa2 rating will be met over the next 12-18 months," Moody's Senior Vice President Sven Reinke said.
The change in Moody's outlook follows Shell's March 31 announcement that it will write down as much as $800 million in the first quarter due to the weak market conditions.
Shell is trying to adapt to the market shocks caused by the new coronavirus, first announcing March 23 that it would slash 2020 capital spending by at least $5 billion, to $20 billion; trim operating costs by as much as $4 billion; and halt the next tranche of its $25 billion share repurchase program. This was followed by its disclosure on March 30 that it will walk away from the proposed Lake Charles LNG project in Louisiana.
Shell also said it has added a new $12 billion revolving credit line commitment, ramping total available liquidity to more than $40 billion.