CORPORATESISSUER COMMENT 18 February 2016RATINGSHESS CORPORATION (HES) Moodys SR Unsecured Rating Baa2Moodys Outlook RURBond-Implied Rating Ba3CDS-Implied Rating B3EDF-Implied Rating Ba3As of February 16, 2016ContactsAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research,Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products.For further detail, please see the last page.Market Signals ReviewHess Corp.: Two Market-Implied Ratings Recover from Lowest Points The bond- and EDF' implied ratings for Hess recently rose from their weakest points of the last five years. The CDS-implied rating remains at its nadir for the period, reached on December 30, 2015. The decline in oil prices and the rising costs in the oil production sector are likely drivers of the market signals decline.Energy companies globally have experienced a severe and rapid deterioration in their CDS-implied ratings gaps (Figure 1). For the sector of 69 global energy companies that we monitor, the average CDS-implied ratings gap is nearly -5 notches (red line) which mapped to an average CDS spread of 923 bp as of February 16. The energy sector average CDS-implied ratings gap is much worse than its -1 notch level two years ago (blue line), zero notch level four years ago (green line), and +1 notch level seven years ago (purple line). The average CDS-implied rating of the energy sector underperformed all sectors in comparison to the levels seven years ago and 12 months ago. Following the energy sector, global banking today has the second worst CDS-implied ratings gap, among 11 market-implied rating categories, at -3 notches. Sovereign and non-banking finance also underperformed other sectors.FIGURE 1. GLOBAL CDS-IMPLIED RATING GAPS BY SECTORMOODY'S ANALYTICS CORPORATES2 18 February 2016 Market Signals Review: Hess Corp.: Two Market-Implied Ratings Recover from Lowest PointsIn December 2015, th...
