BAKU, Azerbaijan, November 13. S&P has upgraded the credit rating of the State Oil Company of Azerbaijan (SOCAR) to 'BB' on improved transparency and financial policy; outlook stable, Trend reports citing the rating agency.
“We have seen material improvement in the State Oil Company of Azerbaijan Republic's (SOCAR's) financial policy transparency and disclosure levels in communications with us, which improves our visibility of the company’s performance. We reflect those changes in an uplift of our assessment of SOCAR’s stand-alone credit profile (SACP) to ‘bb-’ from ‘b’. We therefore raised the long-term issuer credit rating and issue rating of SOCAR and its senior unsecured debt to 'BB' from 'BB-',” said S&P in its latest report.
The stable outlook reflects the rating agency’s views that SOCAR will maintain a manageable liquidity position, supported by its sizable cash balances, while its operational performance remains stable supporting funds from operations (FFO) to debt above 12%, with unchanged state support considerations.
"A clearer financial policy and improved transparency adds visibility to SOCAR’s credit profile. We revised our assessment of the company's governance and financial policy, which affected our view of its SACP, to ‘bb-’ from ‘b’. We had viewed the levels of disclosure and transparency as materially weaker than those of international peers. Although SOCAR is still lagging, we have seen meaningful progress in this regard recently. This improvement includes timeliness and scope of disclosure, with better granularity on the company’s business segments, corporate structure, and strategy. We now understand SOCAR will focus more on domestic upstream projects, which have been core to its cash flow and have less uncertainty on investments than previous years. Still, we will be closely monitoring developments given the company’s track record of opportunistic investments and complex corporate structure," reads the report.