Moody's Ratings has changed to positive from stable the outlook of State Oil Company of the Azerbaijan Republic (SOCAR), and affirmed SOCAR's Ba1 corporate family rating (CFR), Ba1-PD probability of default rating (PDR) and ba2 Baseline Credit Assessment (BCA), Report informs.
"Today's rating action is in line with the sovereign rating action and reflects SOCAR's strong credit linkages with the state as well as its significant exposure to Azerbaijan's operating and macroeconomic environment. The rating action also reflects the company's sound financial performance and credit metrics amid resilient oil and gas market environment; strategic importance for the government of Azerbaijan; and a track record of more discipline in strategic and shareholder decisions, investment spending and shareholder distributions which translate into positive cash generation and solid liquidity," reads the report.
"The positive outlook on the sovereign rating reflects improved economic prospects that have led to a strengthening in credit metrics. Rising prominence of the Middle Corridor further bolsters Azerbaijan's ambition to be a Eurasian transport hub. Greater EU demand for Azerbaijani gas as well as a widening pipeline of renewable projects accelerates diversification from depleting oil resources. At the same time, a lengthening track record of maintaining macroeconomic stability and fiscal discipline confers greater credibility to institutional effectiveness, as proven from resilience in the credit through recent shocks.
As a result, operating and macroeconomic environment for SOCAR has improved and the government's financial capacity to support the company, if needed, has strengthened, which is credit positive for the company," Moody's added.