The international rating agency S&P Global Ratings has confirmed the credit rating of SOCAR at ‘BB-‘, the agency reports
At the same time, the agency revised the forecast on SOCAR ratings from “negative” to “stable” in connection with a similar action on the sovereign ratings of Azerbaijan.
According to the agency’s estimates, SOCAR will continue to receive significant support from the state, given its important role and close ties with the government.
“We, as before, consider SOCAR to be one of the main government assets in the oil and gas industry, which is key for the country’s economy. The company is wholly owned by the government, which is actively involved in defining the company’s strategy and decision-making, and has repeatedly provided it with significant capital injections and leveraged funds to finance capital expenditures,” emphasizes S&P.
“Only about 10% of SOCAR’s debt is guaranteed by the government. The company is quite independent in terms of operational management, has a complex structure that is difficult to control (including international and trading operations, given the absence of centralized cash management or consolidated financial plans,” the agency notes.
S&P points out that the agency’s opinion on increased volatility in the oil and gas exploration and production sector affects the assessment of SOCAR’s business risks.
The agency evaluates SOCAR’s creditworthiness at ‘b-‘ due to high debt burden, negative value of free operating cash flow and low predictability of the company’s strategy.
S&P also believes that SOCAR’s investment strategy is difficult to predict.
S&P expects that the recent commissioning of the Trans-Adriatic Pipeline (TAP), which supplies Azerbaijani gas to European countries, will have only a small positive impact on SOCAR’s performance, as the company is only a minority shareholder in the consortium. In addition, the gas pipeline’s full capacity is likely to be gradual, and the state, not SOCAR, will receive the bulk of the export profit.
SOCAR’s debt exceeds $ 10 billion.
Caspian Barrel
