TEXT-S&P FAQ: How oil & gas prices affect credit in energy sector

(The following statement was released by the rating agency)

Feb 13 - Standard & Poor's Ratings Services' 2012 baseline forecast for $86.32 per barrel for the benchmark West Texas Intermediate crude oil price bodes well for exploration and production (E&P) companies that focus on oil, as well as for oilfield services and contract drilling companies. The outlook for natural gas prices, however, remains bleak. Prices continue to spiral down: The benchmark Henry Hub spot natural gas price is currently hovering around $2.50 per million BTU (mmBTU), versus nearly $4.50 at the beginning of 2011, while the one-year futures price is about $3.00. "The continuing divergence between oil and natural gas prices has created a divergence in the credit outlook for companies in the energy sector," said Standard & Poor's credit analyst Carin Dehne-Kiley, in a report published today. The report, titled "How Strong Crude Oil And Weak Natural Gas Prices Affect Credit Quality In The Energy Sector," answers some frequently asked questions about Standard & Poor's outlook on oil and natural gas prices, and their potential impact on the credit quality of companies in the energy sector. (Caryn Trokie, New York Ratings Unit)