S&P upgrades SOCAR’s stand-alone credit profile rating

International ratings agency S&P Global Ratings has affirmed the long-term issuer credit and issue ratings on Azerbaijan’s State Oil Company (SOCAR) and its senior secured debt at 'BB-', and revised up the stand-alone credit profile (SACP) to 'b' from 'b-', Report informs.

The stable outlook reflects views that SOCAR maintains manageable liquidity commitments, and its operational performance remains solid, with unchanged state support considerations.

“The stable outlook reflects our expectation that SOCAR’s liquidity will remain manageable and the government’s willingness to provide extraordinary and ongoing support will stay solid. It also reflects our anticipation there will be no major delays, cost overruns, or operating issues at the company’s capex projects and core operations, and no major changes in SOCAR’s very strong link with the government,” reads the message.

SOCAR is benefiting from currently elevated prices for commodities, which will boost its earnings and cash flow in 2022-2024 and improve metrics. After a relatively weak 2020 with depressed prices for O&G, the company's earnings materially improved on the back of a much more supportive market environment.

“SOCAR has demonstrated a material boost in earnings and cash flows and we project record consolidated EBITDA of about AZN10 billion [$5.882 billion] for 2022, compared with AZN7.8 billion [$4.588 billion] in 2021 and just AZN4.3 billion [$2.529 billion] in 2020.

Rating upside could stem from a sovereign upgrade. “In our view, a positive rating action based on SOCAR's stand-alone merits is unlikely in the next one-to-two years, given the company's large debt and our already material rating uplift for state support. Beyond then, a positive rating action could be supported by an improvement of SOCAR's SACP to at least 'bb-' on less aggressive and more predictable financial policies, and improvements in management and governance practices, including disclosure and reporting.”