Fitch Ratings has upgraded Azerbaijan's State Oil Company (SOCAR) Long-Term Issuer Default Rating (IDR) and senior unsecured rating to 'BBB-' from 'BB+'. The Outlook on the Long-Term IDR is Stable, the Fitch Ratings press service reported.
Fitch Ratings noted that SOCAR is fully owned by the state and its rating is equalised with that of Azerbaijan (BBB-/Stable) under Fitch's Government-Related Entities (GRE) Rating Criteria.
"This is underpinned by state support provided to the company in the form of financial guarantees, cash contributions and equity injections, as well as SOCAR's social functions and its importance as a state vehicle for the development of oil and gas projects,” Fitch said.
The rating agency explained that the government has historically provided significant financial support, such as capital injections and debt guarantees (4% of SOCAR's debt at end-2023 was state guaranteed).
“SOCAR's financial profile remains strong due to favourable oil and gas prices limiting the need for state support. However, we believe that in case of need, the government would provide direct financial support to SOCAR,” the report reads.
Fitch analysts added that SOCAR's important role in Azerbaijan's economy as an oil and gas producer and seller of refined products on the domestic market and its involvement in significant energy projects, such as the Southern Gas Corridor, which are vital for the country's strategic interests and its energy security.
It was also noted that SOCAR also holds stakes and represents the government in various oil and gas joint ventures vital to the country's hydrocarbon output.
"SOCAR is the largest employer, taxpayer, and the state's vehicle for the development of oil and gas industry in the country,” the Fitch press service said.
