Moody's on Jan. 15 raised its ratings outlook on U.S. integrated oil and natural gas major Chevron Corp. from stable to positive.
The ratings agency also affirmed the company's Aa2 issuer and senior unsecured ratings, as well as the prime-1 short-term rating.
"Chevron's positive outlook reflects our expectation of continued free cash flow generation and debt reduction, strengthening the company's resiliency to volatile oil prices," Moody's Senior Vice President Pete Speer wrote. "The company's enlarged production profile, following the completion of its major development projects, and ability to grow that production going forward through more flexible short-cycle capital spending distinguishes Chevron from its peers and provides the potential for its rating to rise to Aa1."
Moody's expects Chevron's debt will continue to decline through 2020, while production should continue to increase to more than 3 million barrels of oil equivalent per day, from below 2.6 MMboe/d in 2014.
"The company's capital re-investment requirements are also smaller and more flexible, with more than two-thirds of its 2019 capital spending expected to generate cash flow within two-years. This combination of debt reduction and lower capital requirements will make Chevron's improved credit metrics more resilient to periods of weaker commodity prices, and thereby support a potential upgrade to Aa1," the report said.