"Moody's Investors Service" (Moody's) bu gün Azərbaycan Respublikası Dövlət Neft Şirkətinin (SOCAR) Baza Kredit Qiymətləndirilməsi üzrə reytinqini ba3-dən ba2 səviyyəsinə yüksəldib.

Eyni zamanda, Moody's SOCAR-ın korporativ ailə reytinqini (CFR) Ba1 səviyyəsində təsdiqləyib. Proqnoz "stabil" olaraq qalır.

Marja.az bu barədə Moody's-ə istinadən xəbər verir.

Qərar SOCAR-ın maliyyə göstəricilərində və kredit göstəricilərindəki yaxşılaşmanı əks etdirir.

SOCAR 100% dövlətə məxsusdur.

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Moody's affirms SOCAR's Ba1 CFR, upgrades its BCA to ba2, maintains stable outlook

Moody's Investors Service (Moody's) has today upgraded the Baseline Credit Assessment (BCA) of State Oil Company of the Azerbaijan Republic (SOCAR) to ba2 from ba3. Concurrently, Moody's has affirmed SOCAR's corporate family rating (CFR) at Ba1. The outlook remains stable.

A full list of affected ratings is provided at the end of the press release.

RATINGS RATIONALE

Today's rating action, including the upgrade of the BCA, reflects the improvement in SOCAR's financial performance and credit metrics amid supportive oil and gas market environment; the company's strategic importance for the government of Azerbaijan; and a recent track record of more discipline in strategic and shareholder decisions, investment spending and shareholder distributions which translate into positive cash generation and good liquidity.

Because SOCAR is 100% state owned, Moody's applies the Government-Related Issuers (GRI) methodology to determine the company's CFR. SOCAR's Ba1 CFR incorporates (1) the company's BCA of ba2, which measures its standalone credit strength, excluding any extraordinary government support; (2) the Ba1 foreign currency issuer rating of the Government of Azerbaijan, with a stable outlook; (3) the very high default dependence between the state and the company; and (4) the high probability of the government providing support to the company in the event of financial distress.

SOCAR's business and financial profile strengthened over recent years thanks to buoyant hydrocarbon price environment, stable to growing production, and sound trading operations. Following a 56% growth in 2021, revenue increased by 54% to AZN119 billion ($70 billion) in 2022. Moody's-adjusted EBITDA surged to AZN14 billion ($8 billion) in 2022, a record high, from AZN7 billion in 2021 and AZN4 billion a year on average in 2017-20. Revenue is likely to moderate to AZN80 billion-AZN90 billion a year in 2023-24 under Moody's oil price assumptions. EBITDA will be around AZN10 billion a year over the same period, lower than in 2022 but higher than in 2017-21.

Although the government exerts substantial influence over SOCAR, the state has demonstrated more discipline in strategic and financial management of the company lately. This, together with robust financial performance in 2021-22, led to positive cash generation and the accumulation of a sizeable cash position. The company recorded free cash flow (FCF) of AZN2.6 billion in 2021 and AZN6.8 billion in 2022 after negative cash generation in 2019-20. Moody's expects SOCAR to sustain its positive FCF over the next 12-18 months, although the size of that depends on the company's execution of its capital spending programme, oil and gas market conditions, and the shareholder's strategic decisions.

The recommendation also reflects the improvement in SOCAR's credit metrics. Its leverage reduced to 1.5x in 2022 from 3.4x in 2021 and 4.9x average in 2017-20, and is likely to remain around this level over the next two years. Moody's-adjusted EBIT/Interest expense improved to 7.6x in 2022 from 3.7x in 2021, 0.8x in 2020 and around 3.0x in 2017-19. Moody's expects interest coverage to remain solid at 5.0x-6.0x in 2023-24.

The company's liquidity also improved. Its cash balance of AZN12.5 billion as of year-end 2022 and forecasted cash generation of around AZN4.0 billion-AZN5.0 billion over 2023-24 will be sufficient to cover estimated debt maturities of AZN11.2 billion over this period.

In addition, SOCAR's credit quality reflects its (1) key role in the oil and gas sector of Azerbaijan and its importance to the national economy; (2) sustainable hydrocarbon production volumes; and (3) close links with the Azerbaijan government, which has accumulated substantial reserves and should be in a position to provide financial support to the company if needed.

However, the company's rating also takes into account its (1) sizeable trading operations which reduce its consolidated margins, inflate leverage through the use of short-term debt and limit predictability of financial results because of the inherent volatility of these activities; (2) governance considerations, including its complex organisational structure, limited transparency and disclosure, and concentrated ownership which may lead to rapid changes in its strategy and financial profile; and (3) high operational concentration in Azerbaijan.

ESG CONSIDERATIONS

In addition to governance factors mentioned above, SOCAR has high exposure to environmental factors related to carbon transition risk and waste & pollution as decarbonisation efforts and transition towards cleaner energy continues.

The company also has high exposure to social factors, mainly driven by demographic & societal pressures and the push for responsible production, which are common for oil and gas companies.

Overall, ESG considerations do not have material impact on the current credit rating. The company's high environmental, social and governance risks are mitigated by the high probability of government support in the event of financial distress.

RATIONALE FOR THE STABLE OUTLOOK

The stable outlook on SOCAR's rating is in line with the stable outlook on Azerbaijan's sovereign rating and reflects our view that the company's specific credit factors, including its operating and financial performance, market position and liquidity, will remain commensurate with its rating on a sustainable basis.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Moody's could upgrade SOCAR's rating if we were to upgrade Azerbaijan's sovereign rating, provided there was no significant deterioration in the company's specific credit factors, including its operating and financial performance, market position, credit metrics and liquidity, and no weakening in the probability of extraordinary state support in the event of financial distress.

Moody's could downgrade SOCAR's rating if (1) it were to downgrade Azerbaijan's sovereign rating; or (2) there was evidence that the government's capacity and willingness to provide support to SOCAR was diminishing; or (3) the company's BCA is downgraded. SOCAR's BCA could come under pressure if (1) the government's actions significantly impaired its standalone credit profile (including unfavourable regulatory or tax changes, significant equity withdrawals, or increased exposure to large state-initiated investment projects without funding support); or (2) its operating and financial performance deteriorated materially; or (3) its liquidity weakened significantly. Numerically, the BCA could be downgraded if the company's retained cash flow (RCF)/net debt declined below 20% and EBIT/interest expense below 4.0x, both on a Moody's-adjusted and sustained basis.

LIST OF AFFECTED RATINGS

Upgrades:

..Issuer: State Oil Company of the Azerbaijan Republic

.... Baseline Credit Assessment, Upgraded to ba2 from ba3

Affirmations:

..Issuer: State Oil Company of the Azerbaijan Republic

.... Probability of Default Rating, Affirmed Ba1-PD

....LT Corporate Family Rating, Affirmed Ba1

Outlook Actions:

..Issuer: State Oil Company of the Azerbaijan Republic

....Outlook, Remains Stable