BAKU, Azerbaijan, July 18. Moody’s Ratings has affirmed the Baa3 long-term issuer rating of Azerbaijan’s state oil company SOCAR with a Stable Outlook.
“State Oil Company of the Azerbaijan Republic’s (SOCAR) ratings, including its Baa3 long-term issuer rating, with a stable outlook remain unchanged,” Moody’s said in its latest report.
The agency said that under its Government-Related Issuers methodology, SOCAR’s rating incorporates the company’s Baseline Credit Assessment (BCA) of ba2, the Baa3 foreign-currency rating of the Government of Azerbaijan, which owns 100% of the company, the very high default dependence between SOCAR and the government, and the high probability of state support in the event of financial distress.
“SOCAR’s rating incorporates the company’s Baseline Credit Assessment (BCA) of ba2; the Baa3 foreign-currency rating of the Government of Azerbaijan, which owns 100% of the company; the very high default dependence between SOCAR and the government; and the high probability of government support in the event of financial distress,” the report said.
According to Moody’s, SOCAR’s BCA reflects the company’s key role in Azerbaijan’s oil and gas sector and its importance to the national economy, as well as its sound financial performance, strong credit metrics and close links with the Azerbaijani government, which has accumulated substantial reserves and is expected to be in a position to provide financial support if necessary.
At the same time, the agency noted that the BCA also takes into account declining hydrocarbon production volumes, recently increasing M&A activity, governance considerations related to SOCAR’s complex organisational structure and limited transparency, exposure to oil price volatility, and the company’s high concentration in Azerbaijan.
“The BCA incorporates the company’s declining hydrocarbon production volumes, recently increasing M&A activity, governance considerations, exposure to volatility in oil prices, and high concentration in Azerbaijan,” Moody’s said.
SOCAR is engaged in the exploration of oil and gas fields, the production, processing and transportation of oil, gas and gas condensate, the sale of oil and petrochemical products in domestic and international markets, and the supply of natural gas to industrial enterprises and households in Azerbaijan and Europe.
