MUSCAT: International ratings agency Fitch Ratings has affirmed OQ SAOC’s (OQ) Long-Term Issuer Default Rating (IDR) at ‘BB-‘ with ‘Stable Outlook’.
OQ — the integrated global energy group of the Sultanate of Oman — is fully owned by the government via Oman Investment Authority (OIA) and was established to strengthen and centralise Oman’s oil and gas industry.
“OQ’s IDR is equalised with that of Oman (BB-/Stable) to reflect Fitch’s view of strong links between OQ and the state. Under our Government-Related Entities (GRE) Rating Criteria we assess status, ownership and control, support track record and socio-political implications of default as ‘Strong’ while financial implications of default as ‘Very Strong’. This assessment results in a support score of 40 out of a maximum of 60”, Fitch stated on Tuesday.
“We have revised up OQ’s Standalone Credit Profile (SCP) to ‘b+’ from ‘b’ to reflect successful project execution in both the upstream and downstream segments, alongside stronger financial performance on higher oil and gas prices as well as refining and petrochemical margin leading to lower net leverage expectations. OQ’s SCP also reflects its solid business profile with integrated operations spanning exploration and production (E&P), refining, marketing, chemical and petrochemical segments. OQ’s SCP continues to be constrained by its complex group structure”, it further added.
Key Rating Drivers:
’Strong’ Ownership and Control: OQ accounts for a substantial portion of assets transferred to OIA from the Ministry of Finance in 2020. The government exerts significant influence on OQ’s business and funding strategy via OIA. The government has no plans for OQ’s privatisation.
’Strong’ Support Record: OQ has received significant support from the government in the form of equity injections, asset transfers, shareholder loans and debt guarantees. Fitch believes large-scale support in the form of investment-project funding or debt refinancing would be difficult to obtain due to the potential budgetary constraints on the Omani government, but support for OQ’s short-term liquidity and interest payments would be provided, if needed.
’Strong’ Socio-Political Implication of Default: OQ’s consolidated revenue accounted for 26 per cent of Oman’s 2021 GDP. OQ is the main downstream company owning all domestic refining assets producing all transport fuels for the Omani market and is tasked with increasing the value per barrel of extracted oil by further expanding refining and petrochemical assets. It is also the exclusive operator of Oman’s domestic natural gas transportation infrastructure.
Key Investments: OQ completed construction of a $6.9 billion LPIC in 2021 that will annually produce 880,000 tonnes polyethylene and 300,000 tonnes polypropylene. Other key OQ downstream projects include the $8.3 billion Duqm refinery with 230,000 barrels per day, a 50:50 JV with Kuwait Petroleum (Europe) BV that is expected to be commissioned in 2023 (over 90 per cent completed). OQ plans to focus on investment projects already in the pipeline and has suspended some planned large investments, such as a petrochemical plant at the Duqm refinery.
