MUSCAT: International ratings agency Fitch Ratings has upgraded the global integrated energy group of Oman, OQ SAOC's (OQ) Long-Term Issuer Default Rating (IDR), to 'BB+' from 'BB'. The Outlook is Stable, said Fitch on Thursday.
The upgrade follows the upgrade of Oman to 'BB+'/Stable on September 25, 2023, it further noted.
“OQ's rating is constrained by that of Oman, as underlined by strong links between OQ and its ultimate sole shareholder, the Omani state, in line with Fitch's Government-Related Entities (GRE) Rating Criteria and Parent and Subsidiary Linkage (PSL) Rating Criteria. OQ is ultimately fully owned by the state via Oman Investment Authority (OIA) and was established to strengthen and centralise Oman's oil and gas industry,” the ratings agency explained.
OQ accounts for a substantial portion of assets transferred to OIA from the Ministry of Finance in 2020. The government exerts significant influence on OQ's business and funding strategy via OIA.
While the state has no plans for a privatisation of OQ, Fitch says it expects disposals of minority stakes in its subsidiaries to continue. The strategy is in line with similar measures taken or being planned in the near term by other GCC governments for national oil companies.
OQ's consolidated revenue accounted for 26 per cent of Oman's 2021 GDP. OQ is the main downstream company owning all domestic refining assets producing transport fuels for the Omani market and is tasked with increasing the value per barrel of extracted oil by further expanding refining and petrochemical assets. It is also the exclusive operator of Oman's domestic natural gas transportation infrastructure.
OQ was appointed the national champion for clean energy and green hydrogen by the government in 2022 and will be the main developer of Oman's alternative energy projects.
OQ has been proactively managing its balance sheet using strong cash-flow generation and proceeds from asset sales to prepay debt.
It repaid $3.1 billion of debt in 2022 and its total reported debt was $10.6 billion at end-2022, which Fitch believes will further decline to around $8.2 billion by end-2023 and $5.8 billion by 2025 under its rating case.
OQ generated over $5 billion of Fitch-defined EBITDA in 2022, from upstream production of 216 kboepd, and refining capacity of 308kbblpd. The latter will increase this year by a net 115kbblpd as the Duqm Refinery JV comes online in 4Q23.
Its large Liwa Plastics project is now also completed and has reached run-rate levels of utilisation.
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