As oil refiners cope with the energy transition, the debt they have added to their balance sheets to weather the COVID-19 pandemic may force some to choose between debt reduction and dividend payments if the petroleum market recovery lags expectations.
High-yield members of the group, including PBF Energy Inc., CVR Energy Inc. and Delek US Holdings Inc., have already suspended dividends in order to preserve cash. But during third-quarter earnings calls, executives at investment-grade HollyFrontier Corp., Valero Energy Corp., Phillips 66 and Marathon Petroleum Corp. reiterated their commitment to return cash to shareholders despite the pandemic.
"The only thing that's going to stabilize ratings is the demand response," S&P Global Ratings senior director Michael Grande said in a Nov. 19 interview. "When COVID hit, we were predicting by this time during the year, things would be better, and they're not. … I wish I could be more emphatic about our belief that things are going to be better next year."