Standard & Poor’s Ratings Services has revised its outlook on Russia-based Siberian Oil Co (Sibneft) to positive from stable, after the announcement that a 75% stake in Sibneft is being acquired by the Russian gas giant Gazprom for US$13.1bn.
In addition, the ‘BB-‘ corporate credit and the ‘ruAA-‘ Russia national scale ratings on Sibneft were affirmed.
At the same time, the ‘BB-‘ corporate credit rating on Gazprom was affirmed. The outlook on Gazprom remains positive.
“The outlook revision on Sibneft reflects Standard & Poor’s expectation that when the acquisition is completed, Sibneft’s credit quality will benefit from its ownership by Gazprom,” said Standard & Poor’s credit analyst Elena Anankina.
The future rating on Sibneft will depend on the relative status of Sibneft’s creditors versus those of Gazprom and Sibneft’s strategic importance to and integration within the Gazprom group.
The affirmation on Gazprom reflects Standard & Poor’s opinion that the acquisition will not impair the company’s potential for a ratings upgrade, credit quality, and coverage ratios, but that it will enable Gazprom to further diversify into the oil industry, significantly enhance free operating cashflow, and improve its resilience to a lower hydrocarbon price scenario.
S&P assumes that Gazprom will refinance a significant part of the US$12bn bridge loan by the end of 2005, when a US$7bn payment is due from the government-owned vehicle Rosneftegas for its 10.7% treasury stake.
After the acquisition, Standard & Poor’s expects net debt-to-Ebitda (adjusted for guarantees and including Sibneft’s Ebitda) to be about 1.70x, compared with the 1.55x reported by Gazprom in 2004.
The outlook on Gazprom remains positive, reflecting potential benefits of strengthening links between Gazprom and the Russian government, its 50.01% majority shareholder since July 2005, as well as increased gas price expectations on both domestic and export markets during 2005 and in the longer term.
“Gazprom’s acquisition of Sibneft will further strengthen the company’s standing as Russia’s largest corporate and the key government-linked entity in the country’s core oil and gas sector,” adds Anankina. Gazprom is expected to enjoy a strong negotiating position in gaining access to oil and gas projects undertaken with Russian and international companies, which would help to share risks and investments.
Standard & Poor’s will evaluate to what extent these benefits would offset the risk that the government will pressure Gazprom for large debt-financed uneconomical investments and uncertainties arising from the lack of predictability in the Russian government’s economic policy. Depending on these factors, the rating on Gazprom may be raised by one or two notches.