Fitch Downgrades Shell's Credit Rating Amid Debt Concerns

April 1, 2011
Agency cites changes in financial profile with debt increasing $17 billion in 2009 and $5.6 billion 2010.

Royal Dutch Shell's long-term credit-worthiness to AA from AA+ by ratings agency Fitch on April 1. "The downgrade reflects the fact that management fundamentally departed from its conservative financial profile with the increase in net debt of around $17 billion in 2009 and $5.6 billion in 2010," said Jeffrey Woodruff, senior director in Fitch's Energy team.

Fitch added that its downgrade comes as Shell faces key issues, including its ability to increase oil production and fund its North American energy strategy.

It also occurs as Shell on April 1 announced the sale of its refining and distribution activities in Chile to local oil company Quinenco for $614 million.

The move was part of its strategy to consolidate downstream operations into fewer and larger markets. Earlier this week, Shell agreed to sell Britain's second biggest oil refinery to Indian group Essar for $1.3 billion.

Despite concerns over Shell's high debt levels, the group managed to double its net profit in 2010, easily outperforming crisis-hit rival BP thanks to cost-cutting, higher oil prices and rising output.

Net profits, adjusted for the value of inventories of oil and gas, rocketed 90% to $18.6 billion last year.

Copyright Agence France-Presse, 2011

See Also
Shell Plans Further Cost Cuts

India's Esser Buys Shell's UK Refinery

Shell, Brazil's Cosan Form $12 Billion Ethanol Unit

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