OREANDA-NEWS. Liquidity has become critical for many Chinese oilfield services (OFS) companies that face maturing debt amid weaker cash flow generation due to subdued market conditions, Fitch Ratings says in a new report.

Fitch expects 2016 to remain challenging for the Chinese OFS companies, as upstream exploration & production (E&P) investment growth is likely to be constrained by the low oil prices.

Many OFS companies expanded using debt during the market peak in 2011-2014, and those debts are now maturing. Hence liquidity, particularly receivables collection and cash coverage to near-term obligations, is critical to determining the companies' credit profiles, especially for the independent OFS companies, such as Anton Oilfield Services Group (CCC), which generally have lower financial flexibility.

The in-house OFS arms of the national oil companies, such as China Oilfield Services Limited (A/Stable), benefit from more stable order flow from their parents. Their financial profiles, however, are not immune to the reduction in contracts and day-rates.