Fitch Ratings Sees US Refiners Remaining Stable in 2016, Sees MLPs Benefiting From 'their more than stable cash flows'

The credit profiles of North American refiners should remain insulated in 2016, anchored by strong balance sheets and cash flow, according to Fitch Ratings' 2016 Outlook. The agency expects the sector and its ratings to remain stable next year. 'U.S. refiners continued to enjoy the benefits of strong crack spreads, and excess cash flow has primarily been used for share buybacks and dividend increases,' says Brad Bell, Associate Director. 'But investment-grade balance sheets are in good shape, and we do not expect shareholder-friendly activities to affect credit profiles in 2016, as they can quickly be curtailed if profitability begins to suffer.' Demand for product exports will be a key issue to watch in 2016 as it continues to bolster U.S. refinery utilization and will help to reduce elevated crude inventories. Increasing global refining capacity could lead to increased competition in international markets, pressuring margins on exports. However, Fitch believes the U.S. will remain competitive in international markets given its structural cost advantages, primarily low U.S. natural gas and power prices. Other key issues to watch in 2016 include: --Evolving crude slates and role of imports: the potential for increased volatility between crude grades could make imports and logistics capabilities more important for maintaining profitability; --Domestic gasoline demand: increases in U.S. vehicle-miles driven and transport demand should keep gasoline demand steady and help to offset fuel mileage efficiency gains; --Dropdown opportunities: refiners with master limited partnership (MLP) subsidiaries may benefit from their more stable cash flows, ability to self-fund, and availability as a funding lever for sponsors. The full report, '2016 Outlook: North American Refining,' is available at www.fitchratings.com or by clicking on the link. Additional information is available at www.fitchratings.com 2016 Outlook: North American Refining (With Ample Global Supply, Focus on Product Demand, Exports) https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874086