Baku, Azerbaijan, Dec. 5
By Azad Hasanli - Trend:
Standard & Poor's Ratings Services has affirmed its 'BB+' long-term corporate credit ratings on the State Oil Company of Azerbaijan Republic (SOCAR) and related debt ratings, said the message of the company.
The ratings services removed the SOCAR ratings from CreditWatch, where they were placed with negative implications on Oct. 5, 2015.
The outlook on the corporate credit rating is negative, according to the message.
"The affirmation reflects our view that the SOCAR should be able to maintain ratings-commensurate credit metrics even in the lower oil price environment," the authors of the report said.
"In line with international peers, SOCAR is reducing its capital spending, which should allow the company to generate positive free operating cash flow (FOCF)," said the message. "We also expect it will receive continuing ongoing support from the government, which we capture in our business and financial risk, and liquidity assessments, including our expectation that the government will finance part of SOCAR's capex in 2016."
S&P has assessed the stand-alone credit profile (SACP) on SOCAR at 'bb-', compared with 'bb' previously.
"Subject to the sovereign ratings, we could consider an upgrade over time if SOCAR's stand-alone performance improves by two notches to 'bb+', which could be achieved only as a result of prices quickly recovering to above our long-term price assumption of $70 per barrel and lower capital investment commitments," said the message.
"In line with our methodology for rating government-related entities (GREs), we view SOCAR's role in the country's economy as "critical"," said the message. "The company plays a central role in Azerbaijan's most strategic sector, oil and gas. SOCAR is the country's largest employer and a substantial taxpayer."
SOCAR includes production associations Azneft (the enterprises producing oil and gas onshore and offshore), Azerkimya (the chemical industry enterprises) and Azerigaz.
The company also has a number of processing enterprises, service enterprises, and institutions involved in geophysical and drilling operations.