Standard & Poor’s Ratings Services has affirmed its ‘B’ ratings on Russia-based oil company OJSC Oil Company Rosneft, following a review. The outlook is negative.

“The ratings continue to reflect Rosneft’s aggressive financial policy and deteriorating financial profile, which are partly tempered by the company’s large oil reserves, vertical integration, and access to exports,” says Standard & Poor’s credit analyst Elena Anankina.

At June 30, 2003, Rosneft had total debt of US$2.35bn. The rating assumes, however, that Rosneft’s management will succeed in its policy to keep total debt under US$2.3bn by the end of 2003 and that the company’s liquidity will not be impaired by any covenant violations.

Currently, the company’s investment plans exceed its cashflow generation, even under the currently favourable oil price environment. This may impair the company’s ability to service debt under Standard & Poor’s mid-cycle price scenario of US$18 per barrel and may lead to covenant violation.