Azerbaijan, Baku, April 16 / Trend A.Badalova /
Fitch Ratings has assigned JSC National Company KazMunayGas's (NC KMG) USD-denominated notes an expected foreign currency senior unsecured 'BBB(EXP)' rating, Fitch reported on Tuesday. The notes are issued under NC KMG's the USD10.5 billion medium term programme rated at 'BBB' by Fitch.
Fitch upgraded NC KMG's Long-term foreign and local currency Issuer Default Ratings (IDRs) in November 2012 to reflect the upgrade of Kazakhstan's Long-term foreign and local currency IDRs to 'BBB+' and 'A-' respectively.
"Although NC KMG continues to benefit from strong links with the Kazakh state, an explicit state guarantee would be needed for a significant portion of NC KMG's debt to ensure a full rating alignment, in the agency's view. Therefore, the company's ratings are notched down one notch from the sovereign ratings," the agency said. Fitch views NC KMG's standalone operational and credit profile as commensurate with the 'BB' rating category.
Fitch considers the continued development of the main oil and gas projects in Kazakhstan operated by joint ventures (JVs) and associates, in which NC KMG has equity stakes, as a pre-requisite for the company's production growth in the medium term. "This is in contrast to JSC KazMunaiGas Exploration Production, majority-owned by NC KMG, whose primary goal is to arrest natural production decline and maintain stable oil output levels from its fields. Nonetheless, upstream is likely to remain NC KMG's leading segment by EBITDA and cash flows contribution," Fitch said.
Fitch expects that cash dividends from NC KMG's JVs and affiliates will remain the main source of its cash inflows in 2013-2014. The agency stressed that in 2012, NC KMG received KZT504 billion in dividends from JVs and associates, up from KZT406 billion in 2011, while it only generated KZT94 billion in net cash flows from operations. The agency anticipates that Tengizchevroil LLP, NC KMG's largest affiliate by dividend contribution, will continue paying large dividends to the company despite its expansion plans. In 2012, Tengizchevroil paid KZT244m in dividends to the company, a nearly 20 percent drop on the 2011 levels, the report said.
According to the report, NC KMG plans to implement an ambitious capex programme of nearly USD17 billion in 2012-2016, and fund almost half of it with debt. As a result, Fitch forecasts that the company's funds from operations (FFO) adjusted leverage will remain well above 3x in 2012-13, based on the agency's oil price deck for Brent of USD100 per barrel in 2013 and USD92 per barrel in 2014. The agency also anticipates that the company will continue generating negative free cash flow in 2013-2014.