Baku, Azerbaijan, Nov. 13
By Elena Kosolapova - Trend:
Standard & Poor's Ratings Services affirmed its long-term corporate credit rating on Kazakhstan-government-controlled vertically integrated oil company KazMunaiGas NC JSC (KMG) and its core subsidiary KazMunaiGas Exploration Production JSC at 'BB+', the agency said Nov.13.
The outlook remains negative, according to the agency.
The rating agency also affirmed its 'kzAA-' Kazakhstan national scale rating on KMG.
"We revised our assessment on KMG's financial risk profile to "aggressive" from "highly leveraged" because we anticipate leverage will improve following the sale of KMG's 50 percent stake in Kashagan," said the message.
The S&P currently projects that adjusted debt to EBITDA will average 2.5x-3.0x in the next 12-24 months and free operating cash flow will remain negative. However, the agency believes that this improvement might be temporary, as the company could buy back its stake in Kashagan once oil prices improve and the company can raise sufficient debt without breaching its covenants.
In early July, Kazakh national oil and gas company KazMunaiGas said that it plans to sell 50 percent in KMG Kashagan B.V., which owns a 16.88 percent stake in the project to develop super-giant field Kashagan, to the Kazakh National Welfare Fund Samruk-Kazyna. The closing of the Kashagan Sale is expected to occur before the end of 2015.
Kashagan is a large oil and gas field in Kazakhstan, located in the north of the Caspian Sea. The geological reserves of Kashagan are estimated at 4.8 billion metric tons of oil. The total oil reserves amount to 38 billion barrels; some 10 billion out of them are recoverable reserves. There are large natural gas reserves at the Kashagan field - over one trillion cubic meters.
The production at the Kashagan field started September 2013, but in October, it was ceased after a gas leak in one of the main pipelines. The analysis revealed numerous cracks in the pipeline, which needed to be completely replaced. The replacement was projected to take at least two years.
KMG is a 100 percent government-owned national oil company with stakes in essentially all of Kazakhstan's oil-related assets and priority access to new assets.
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