Fitch awards SOCAR with rating "BB+, forecast "Stabile"
Azerbaijan, Baku, October 15 / Trend /
Fitch Ratings awarded SOCAR (State Oil Company of Azerbaijan) with long-term Issuer Default Rating "BB+" and short-term Issuer Default Rating "B". The forecast on long-term Issuer Default Rating is "Stabile", Fitch Ratings said.
As SOCAR is in 100-percent state property, it represents state interests in oil and gas sector important for Azerbaijani economy. It is also the largest tax-payer in Azerbaijan. Fitch considers legal, operational and strategic ties between the state and the company as strong ones. Therefore, the company's rating is connected with Azerbaijani rating ("BB+"/ forecast "Stabile") in accordance with methodology Fitch "Interaction between ratings of maternal and subsidiary companies".
Moreover, SOCAR's rating reflects diversified profile of business. Sale refers to regulated domestic market there. Therefore, the company is less vulnerable to prices for oil and gas on the international market.
As SOCAR's major oil fields are mature, Fitch expects that growth of the company's oil and gas exploration will be stipulated by increase of exploration within largest production sharing agreements. Nevertheless, the group has good positions among comparable companies on indices of replacement and multiplicity of reserves.
Moreover, ratings take into account financial indices of the company (given margin EBITDAR worth 38.9 percent for 2008 and net leverage in 0.8x corrected by Fitch) regard to comparable Russian and the international companies.
Though general leverage of the company increased up to 1,4x in 2008 (0,2x in 2007) after purchase of Turkish oil-chemical producer Petkim Petrokimya Holdings AS ("Petkim", rating "BB-"/ forecast "Nagative") for $2 billion, structure of a debt on a term of paying off is well-balanced but position of liquidity - adequate.
As of late 2008 the company's funds hit 512.2 million manat. It is rather higher compared to short-term debt worth 408 million manat.
Fitch stresses that SOCAR intends to expand activity by implementing intensive investment program worth 5.2 billion manat ($6.4 billion) over 2009-2013 (without obligations within production sharing agreements). Realization of this program together with planned construction of refinery at Petkim's production area worth $4.4 billion can call for significant foreign investment. It would lead to significant increase of leverage.