DOHA: Moody’s Investors Service has confirmed the Aa2 issuer rating of Qatar Petroleum (QP) and Aa3 issuer rating of Industries Qatar (IQ) and assigned a negative outlook. Moody’s has also confirmed the Aa2 issuer rating and senior unsecured bond ratings of Qatari Diar Finance (QDF) and assigned a negative outlook. Today’s rating actions conclude the review for downgrade which Moody’s initiated on March 8, 2016.
Today’s actions follow the confirmation of the sovereign rating of Qatar and the assignment of a negative outlook on May 14, 2016.
Explaining the rationale for confirming QP’s Aa2 rating and assigning a negative outlook, the ratings agency noted the action is in line with the rating action on the sovereign rating of Qatar and primarily reflects the strong credit linkages between QP and the Government of Qatar. As Qatar’s national oil & gas company, QP remains at the heart of Qatar’s economy and social development and provides more than 75 percent of the government’s revenues both directly (through taxes and royalties, mainly on exports) and indirectly (through dividends from QP), as well as contributing to a large portion of the country’s gross domestic product (GDP). This is reflected in Moody’s high extra-ordinary support and very high dependence assumptions.
Despite the negative impact of the decrease in oil and gas prices since H2 2014 on QP’s revenue and cash flow generation, the company continues to have a very solid financial profile supported by a net cash position as of year-end 2014; and the delay in capex and the reduction of opex over the past 18 months in order to increase operational efficiencies.
On confirming IQ’s rating and outlook, Moody’s said the action is in line with the rating action on the sovereign rating of Qatar and primarily reflects the strong credit linkages between IQ and the Aa2-rated QP as a result of IQ’s strategically important position as a Qatar Petroleum subsidiary in developing its mature downstream activities. This translates into Moody’s high extra- ordinary support and very high dependence assumptions.
IQ’s financial profile has improved significantly over the past few years, following the gradual decrease in capex to QR682m in 2015 from QR4.5bn in 2009, resulting in an increasing net cash position to QR6.9 bn in 2015. While Moody’s expects that the low oil prices will enhance the competitive market position of IQ’s joint ventures’ peers as they benefit from lower feedstock prices, IQ’s baa1 Baseline Credit Assessment (BCA) is underpinned by the high degree of financial flexibility that the company has managed to build over recent years when oil prices were high. Moody’s expects that IQ will remain free cash flow positive over the next few years, benefitting from low capex requirements, expected to be in line with 2015.
Moody’s confirmed QDF’s Aa2 ratings, in line with the action on the sovereign rating of Qatar as the government, acting through the Ministry of Finance, unconditionally and irrevocably guarantees the payments in respect of the bonds that QDF issued.
The Peninsula
