Fitch Ratings agency will not be surprised if State Oil Company of Azerbaijan (SOCAR) will allow a significant reduction of its capital investments.
Agency claims that reduction of capital investments by 15-20%, because of slump of oil prices in the world has been named among the possible assumptions with the current evaluations of SOCAR’s rating.
The agency claims that in 2015 oil prices will be in average $55.00 per barrel and in 2016 – $65.00. It believes that SOCAR’s net leverage of FFO (funds for operations) will total 2x.
The agency added that in 2014 SOCAR extracted in average 297,000 barrels a day, while cost price of production was higher, than that of the similar companies in Russia, but this was partially compensated by the income from oil transportation and refining.
“We conservatively evaluate SOCAR’s plans to invest $2.2 billion in 2015-2016. The company has low flexibility of capital investments, because majority of funds assigned for suspension of production decline on the old fields is used to fulfill obligations of production sharing agreements (PSA) and complete the ongoing projects,” the Agency reported.
Fitch Agency reported that SOCAR’s resources, which were estimated at $1.5 billion by July 1, 2014, were insufficient to cover a short-term debt of $2.2 billion.
