Strong mergers and acquisitions (M&A) activity in the Asian oil and gas sector will continue into 2012, according to Fitch Ratings.
The agency’s latest reports on the sector reveal that a ‘stable’ rating has been maintained for the sector after it was ruled that credit profiles will not be unduly affected by this activity.
“Fitch expects M&A activity to remain high for the Asian oil and gas sector. Prospects for large M&A are especially strong for state-linked oil companies,” Fitch reports.
State connections, along with large cash reserves and “robust” balance sheets are predicted to provide sufficient flexibility for further M&A activity, even with capex expected to remain high.
Even though consumer inflation has eased in these markets, Fitch predicts that fuel price reforms remain a principle challenge for the sector.
Malaysian authorities have signaled an end to gas subsidies, although evidence of a strong commitment has yet to appear, and China may rethink its fuel pricing after incurring heavy losses on refining operations due to price controls, according to the rating agency.
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