Baku, Azerbaijan, Jan. 30
By Ali Mustafayev – Trend:
S&P Global Ratings said today that it has affirmed its 'BB-' long-term corporate credit rating on Kazakhstan's 100 percent state-controlled national oil company KazMunayGas NC JSC (KMG) and its core subsidiary KazMunaiGas Exploration Production JSC (KMGEP). The outlooks are stable.
“We have also affirmed our 'kzA-' national scale rating on KMG”, S&P said in a message.
The affirmation reflects agency’s view that KMG's credit metrics will likely improve, owing to the potential upstreaming of KMGEP's cash to KMG after the minority shareholder buyout, higher oil prices, and the expected completion of key capital expenditure (capex) projects.
"In addition, we expect the recent extension to 2020-2022 of KMG's option to buy back a stake in the Kashagan oil project will provide KMG with additional flexibility. Still, as long as the Kashagan option is outstanding, and refinancing or repayment of debt at KMG's immediate parent Samruk-Kazyna remains unresolved, uncertainty over KMG's financial policy will continue to constrain our assessment of the company's stand-alone credit profile (SACP) at 'b' and the overall rating at 'BB-'”, the message said.
On Jan. 23, 2018, KMGEP announced that it had received valid acceptance of its tender offer to buy out all outstanding global depositary receipts (GDRs) and that its board unanimously approved the offer to repurchase all of KMGEP's outstanding common shares.
The company expects to complete the minority buyout in March 2018 and subsequently apply to delist KMGEP from the London and Kazakhstan stock exchanges. As a result, KMG's share in KMGEP could increase to up to 100 percent from the current 63 percent.
“Previously, we treated KMGEP's solid cash balances of about $4 billion as not immediately available to service its parent's debt. Now we estimate that about $2 billion in cash will be used to buy out KMGEP's minority shareholders, while most of the remaining $2 billion should become available to KMG. We would therefore adjust KMG's reported debt by deducting this additional surplus cash”.