Fitch Ratings has revised the Outlook on State Oil Company of the Azerbaijan Republic's (SOCAR) Long-Term Issuer Default Rating (IDR) to Positive from Stable and affirmed the IDR and senior unsecured rating at 'BB+', Report informs referring to the rating agency’s website.
The Recovery Rating is 'RR4'.
“The rating actions follow the revision of the Outlook on Azerbaijan's sovereign rating (BB+/Positive) and SOCAR's stronger credit profile, which could lead to an upward revision of its Standalone Credit Profile (SCP),” reads the report.
SOCAR is fully owned by the state and its rating is currently equalized with that of Azerbaijan under Fitch's Government-Related Entities (GRE) Rating Criteria. This is underpinned by state support provided to the company in the form of financial guarantees, cash contributions and equity injections, as well as SOCAR's social functions and its importance as a state vehicle for the development of oil and gas projects.
“We assess SOCAR's SCP at 'b+',” reads the message.
Most oil and gas projects in Azerbaijan operate under production-sharing agreements, in which SOCAR has a minority stake and where it also represents the state and is involved in marketing the latter's share of crude oil and gas (profit oil). In addition, SOCAR has stakes in some other major energy projects promoted by the state, such as the Southern Gas Corridor (SGC).
“The state exercises significant control over SOCAR's profitability and balance sheet through regulation of domestic fuel prices, cash injections, government distributions and other measures. …we believe that the government has incentives to keep SOCAR adequately funded.”
