OREANDA-NEWS. Fitch Ratings has updated and republished its commentary "Using Commodity Prices in Corporate Projections", originally published in 2011. In assessing a commodity company's credit rating, we undertake projections of operational and financial profiles using various assumptions, including future commodity prices.

The purpose of Fitch's corporate price assumptions is to provide a range of foreseeable operational and financial profiles within the rating time horizon, rather than project a single most-likely commodity price. This set of mid-cycle assumptions is designed to be conservative for rating purposes, and is usually below consensus figures. There are times when prices trough, however, that it will occasionally be above consensus levels.

Our mid-cycle approach ensures a common price corridor applied globally across our portfolio of commodity producers, and limits the extreme volatility in individual issuer and aggregated financial forecasts, compared with other corporates, which a purely market-based forecast would generate.

In addition, notably given the vulnerability of lower rated issuers to low prices, Fitch considers a variety of more stringent price scenarios to test the "survivability" of companies. In addition, Fitch considers the result of "corrective actions" taken by companies - such as capex cuts - over the longer term. Actions which leave a company under-invested on emergence from a cycle could also prompt negative action.