Standard & Poor’s Ratings Services has assigned its ‘ruAA’ national scale rating to

  • Lukoil OAO, Russia’s largest vertically integrated oil major, in line with the company’s ‘BB-‘ long-term local and foreign currency corporate credit ratings.


“The ratings reflect Lukoil’s standing as the Russian Federation’s (foreign currency, ‘BB/Stable/B’; local currency, ‘BB+/Stable/B’) largest oil company in terms of crude reserves, production, and exports, tempered by its moderate cost structure and leveraged financial profile,” says Standard & Poor’s credit analyst Eric Tanguy.

The ratings are also supported by management’s recent measures to improve the company’s overall cost structure, as well as by Lukoil’s relatively prudent debt maturity profile and historically sound cash flow generation. Liquidity has also been strengthened by Lukoil’s widened access to international capital markets; in November 2002, it successfully placed a US$350mn five-year convertible bond.

The current ratings provide limited room for further debt increases. “Standard & Poor’s will continue to monitor Lukoil’s ability to generate sufficient after-tax cash from operations to finance its capital-expenditure requirements, ambitious expansion plans, and financial-debt obligations especially if crude prices decrease significantly from their currently high levels,” adds Tanguy.

The rating factors in the expectation that Lukoil will self-finance its investments within the framework of Standard & Poor’s mid-term crude price scenario (US$17 per barrel of Brent) and that the company will maintain credit protection measures in line with the ratings. No significant debt-funded acquisition is factored into the current ratings.