Moody's completes periodic review of ratings of SOCAR

# 15 December 2020 10:11 (UTC +04:00)

Moody's Investors Service ("Moody's") has completed a periodic review of the ratings of State Oil Company of the Azerbaijan Republic (SOCAR) and other ratings that are associated with the same analytical unit, APA reports citing Moody's.

The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since 1 January 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion.

SOCAR’s Ba2 corporate family rating is on par with Azerbaijan's sovereign rating. Moody's applies its Government-Related Issuers rating methodology to rate SOCAR. The company's rating factors in its b1 Baseline Credit Assessment (BCA), which is a measure of the company's standalone credit strength; the Ba2 local-currency rating of the Government of Azerbaijan; the very high default dependence between SOCAR and the government; and the high probability of government support for SOCAR in the event of financial distress.

The publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement.

“SOCAR's BCA factors in the company's key role in the oil and gas sector and the national economy of Azerbaijan, close links with the government, stabilized hydrocarbon production volumes, adequate liquidity, and Moody's expectation that the company's credit metrics will remain commensurate with its BCA on a sustainable basis despite the weakening in 2020 because of low oil prices. The BCA also takes into account SOCAR's sizeable trading operations, which dent its consolidated profitability and inflate leverage,” reads the publication.