Fitch Affirms SOCAR at 'BBB-'; Outlook Stable

Fitch Ratings has affirmed State Oil Company of the Azerbaijan Republic's (SOCAR) Long-term Issuer Default Rating (IDR) at 'BBB-', Short-term IDR at 'F3' and senior unsecured rating at 'BBB-', the agency said in a statement.

The Outlook on the Long-term IDR is Stable.

The ratings of SOCAR, a wholly state-owned national oil company of Azerbaijan (BBB-/Stable), are aligned with the sovereign's. SOCAR is a mid-size integrated oil company with 2013 hydrocarbon production of 255 thousand barrels of oil equivalent per day (mboepd) and a number of assets in midstream, downstream, chemicals and retail.

SOCAR controls Petkim, Turkey's only chemical producer, and is constructing a 10 million ton capacity STAR refinery in Turkey. It is also a party to several production-sharing agreements (PSAs) in Azerbaijan and receives specified volumes of oil, natural gas and gas condensate free of charge.

Under Fitch's conservative forecasts SOCAR's credit metrics will deteriorate moderately in 2013-2015, with funds from operations (FFO) net leverage increasing to 1.9x in 2016, from 1.5x in 2012 and FFO interest coverage declining to 9.6x in 2016, from nearly 16.8x in 2012, before taking into consideration any divestments.

ANN.Az