Azernews.Az

BAKU – Fitch Ratings has affirmed the Azerbaijani state oil company Socar’s Long-term foreign currency Issuer Default Rating (IDR) at 'BBB-' and Short-term foreign currency IDR at 'F3'. The Outlook for the Long-term IDR is Stable, the agency reported on Thursday.

Fitch continues to align Socar's ratings with the sovereign's (the company is 100%-state owned), as the agency considers the legal, strategic and operational ties between Socar and its parent as strong, according to Fitch's Parent and Subsidiary Rating Linkage methodology.

Socar represents the state's interests in the oil and gas industry, which is vital to Azerbaijan's economy (oil and gas accounted for 95% of the country's exports in 2010). The Ministry of Finance also provides a guarantee for Socar's 750m manats (around $943m) loan due in 2016 (26% of gross debt at end-2009). Fitch views Socar's standalone rating to be commensurate with the 'BB' rating category.

Fitch expects Socar to report favorable financial results in 2010. Fitch also anticipates the company will generate solid cash flow from operations in 2011 supported by the more favorable oil and gas industry environment. Fitch forecasts that the company's free cash flow will turn positive in 2011 but is likely to revert to being negative afterwards.

The ratings also consider Socar's intensive capex program of 6.5bn manats (including the company's obligations under the production sharing agreements) over 2011-2015. In addition, the company plans to build a refinery at Petkim Petrokimya Holdings A.S.'s site, with throughput capacity of approximately 10 million tons.