Abu Dhabi – Mubasher: Fitch Ratings on Tuesday affirmed Abu Dhabi National Oil Company's (ADNOC) Long-Term Issuer Default Rating (IDR) at “AA” with a stable outlook.
The rating of the UAE’s state-run oil company reflects its high upstream output coupled with low production costs, significant reserves, downstream integration and a conservative financial profile, the US rating agency said in a report.
“Today’s announcement by Fitch, one of the leading, global credit rating agencies, recognizes ADNOC’s world-class resources, our strong operating and financial performance, our robust financial profile and our disciplined investment model,” Sultan Ahmed Al Jaber, UAE Minister of State and ADNOC Group CEO, commented.
The IDR of ADNOC, one of the world’s largest oil producers, reflects the strong links between the company and the sovereign, and the influence the state potentially can or does exert on the company through regulating the level of production, taxation and dividends.
“We estimate the company's funds from operations (FFO) adjusted net leverage, including capitalised operating leases, at less than 0.5x at end-2018, and we forecast this will not exceed 0.5x over the rating horizon,” the report highlighted.
Moreover, ADNOC is planning to raise its average annual capex by around 70% for 2019-2023 relative to 2016-17, but this will continue to be predominantly funded from operating cash flows.
The rating also reflects the influence the GCC nation potentially “can or does exert on the company” by regulating the level of production, in line with its the Organization of Petroleum Exporting Countries’ (OPEC) commitments, taxation and dividends.
“We estimate that in 2016-2017, the company on average accounted for more than 50% of the Abu Dhabi's budget revenue and current external receipts (excluding proceeds generated by / taxes paid by ADNOC's international partners),” the rating agency said.
However, ADNOC’s plan to increase its gross capacity from 3.5 million barrels per day (mmbpd) at end-2018 to 4 mmbpd by 2020 and 5 mmbpd by 2030 will not necessarily bring additional benefits in the short term due to the OPEC restrictions.
According to ADNOC’s 2030 smart growth strategy, the company has consolidated its businesses and unified its brand identity, entered the global capital markets for the first time, completed the first-ever IPO of an ADNOC business, opened-up its concessions to new strategic partners, competitively tendered new exploration blocks for the first time in Abu Dhabi’s history.
