Fitch confirmed KazMunaiGas ratings at BBB, forecast Stable

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The International Fitch Ratings agency has confirmed the long-term rating of default issuer (RDE) of the national company KazMunaiGas in the foreign currency at “BBB” with the “Stable” forecast, reported the agency.

The agency has also confirmed the priority unsecured rating of KazMunaiGas Finance Sub B.V. in foreign currency at “BBB” level.

KMG is 100% state owned holding company. The company’s ratings are calculated down from the sovereign rating.

“The main extracting daughter company KMG faces reduction of production and Fitch expects that any production growth will be ensured by joint ventures and associated companies of the group,” reads the company’s statement.

The agency does not believe that significant remainder of funds of the group worth 1,216,000,000 tenge, including the short-term deposits by the end of 2013, fully compensate its high leverage and continues focusing in its analysis on the indexes of gross leverage. According to the agency’s forecasts, the gross corrected leverage of funds from the operation activities (FFO) of KMG will remain above 4 from 2015 to 2017.

The main goal of the daughter company KazMunaiGas Exploration & Development, in which KMG company has a majority share, is to maintain the stable production on its mature oil fields.

In 2013 KMG received dividends from joint ventures and affiliated company worth 371 billion tenge, while net inflow from daughter company totaled 344 billion tenge.

In 2013 Tengizchevroil, the biggest affiliated company of KMG national company on the amount of dividend payments, has paid to KMG dividends worth 254 billion tenge against 244 billion tenge in 2012. The agency expects reduction of dividends from Tengichevroil from 2014 to 2016, because of the company’s expansion plans.

At present KMG has been implementing the program of Atyrau oil refinery upgrade. In 2014 the group plans to start upgrade of Shimkent and Pavlodar oil refineries and complete it by 2016 to ensure correspondence of the products to Euro-4 and Euro-5 standards. The company expects that total volume of investments in the projects of refining and sales will total $4.9 billion till the end of 2016.

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