Saudi Aramco received on Monday high first-time credit ratings from Fitch Ratings and Moody’s as Saudi Arabia’s oil giant is getting ready to launch its first bond in U.S. dollars.
Fitch Ratings and Moody’s came to their respective A+ and A1 ratings of Saudi Aramco on the strong balance sheet of the world’s largest oil company, a very conservative financial profile with low debt, the acquisition of one of the world’s top petrochemical producers, SABIC, low costs of production, and strong profitability.
The rating, however, is capped by the very close linkage between Aramco and the government of Saudi Arabia, Fitch and Moody’s say.
According to Fitch Ratings, Saudi Aramco’s long-term issuer default rating (IDR) is capped at A+, because it takes into account “strong links between the company and the sovereign, and the influence the state has on the company through regulating the level of production, taxation and dividends.”
One of the key rating drivers for Fitch is the fact that Aramco is the world’s top oil producer with 2018 liquids production and total hydrocarbon production averaging 11.6 million and 13.6 million barrels of oil equivalent per day, respectively—this is well ahead of the upstream production of integrated producers such as Abu Dhabi National Oil Company (ADNOC), Shell, or Total. To compare, Fitch rates ADNOC at AA with a “stable” outlook, Shell at AA-/Stable, Total at AA-/Stable, and BP at A/Stable.
Moody’s, for its part, also says that Aramco’s rating would have been even higher were it not for the close link between the company and the government. Related: Study Blames White American’s Diet For Climate Change
“Saudi Aramco has many characteristics of a Aaa-rated corporate, with minimal debt relative to cash flows, large scale of production, market leadership and access in Saudi Arabia to one of the world’s largest hydrocarbon reserves. These features position it favourably against the strongest oil and gas companies that Moody’s rates,” Rehan Akbar, a Vice President - Senior Credit Officer at Moody’s, said in a statement.
Moody’s rates the integrated international majors as follows: ExxonMobil - Aaa stable, Chevron - Aa2 positive, Shell - Aa2 stable, and Total - Aa3 positive.
The ratings of both agencies came as Aramco is set to meet this week investors in Asia, the U.S., and Europe for a roadshow for its first-ever U.S.-dollar denominated bond issue, expected to be worth at least US$10 billion.
By Tsvetana Paraskova for Oilprice.com
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