BAKU, Azerbaijan, November 13. Azerbaijani state oil company’s (SOCAR) credit metrics should remain relatively stable, albeit with limited headroom, Trend reports citing S&P.
“We expect SOCAR’s EBITDA to decrease over 2025-2027 toward Azerbaijani new manat (AZN) 5.5 billion-AZN6 billion from AZN6.7 billion in 2024 on lower oil and gas prices, as well as slowly declining oil and gas production output. SOCAR’s FFO should remain generally stable thanks to lower taxes and slightly lower interest expenses, allowing FFO to debt to remain in the 12%-15% range under our base-case scenario. This incorporates higher capital expenditure (capex) of about AZN3 billion annually, reflecting potential upstream investments, and steady dividend distribution. Under these assumptions, SOCAR’s S&P Global Ratings-adjusted debt should remain relatively high, at AZN27.5 billion-AZN28 billion despite moderately positive free operating cash flow (FOCF) of AZN1 billion,” reads the report issued by the rating agency.
S&P said it bases its ratios on gross debt (although they incorporate other adjustments), as it does not net SOCAR’s sizable cash with debt.
“However, the company has significant amounts of cash on the balance sheet of about AZN14 billion as of December 2024 which supports SOCAR’s liquidity characterized by large share of short-term debt. Accounting for the cash, FFO to debt improves to slightly above 20%, which we expect the company to maintain.”