Fitch Ratings has revised QatarEnergy's (QE) Outlook to Positive from Stable, while affirming its Long-Term Issuer Default Rating (IDR) at 'AA-'.
The Outlook revision on QE reflects a similar sovereign rating action on
Fitch assesses the Standalone Credit Profile (SCP) of QE at 'aa+', which is supported by the large scale of its liquefied natural gas (LNG) franchise, low production costs, large reserve base and conservative leverage. While focused on a single country, its operations are predominantly gas, which makes it better placed for energy transition than other oil and gas majors.
Key constraints include completion risk for large capex projects related to an increase in LNG production, and political risk.
Key Rating Drivers
Sovereign Constrains Rating: QE's rating is constrained by that of
Strong Relations with Government: QE has no near-term privatisation plans. The board of directors currently includes the deputy Emir of
High Systemic Importance: We view socio-political implications of default as 'Very Strong' and financial implications of default as 'Strong'. This is due to QE being an investor in and a primary driver of the oil-and-gas value chain of
LNG Expansion Progressing: QE plans to expand its LNG production capacity to 126mtpa by 2028, from 77mtpa currently. The investments will be funded by proceeds from its 2021 bond issuance, operating cash flows and contributions by partners. QE has already entered into partnership agreements for the LNG projects with major global oil and gas companies and awarded engineering, procurement and construction (EPC) contracts.
International Expansion Continued: QE owns 70% of the Golden Pass LNG project (16mtpa) in
Contracted Volumes, Oil-Linked Pricing:
Derivation Summary
QE's SCP of 'aa+' is equal to that of
QE's ratings are constrained by those of
Key Assumptions
Key Assumptions for our Rating Case for the Issuer:
Oil & gas prices to 2026 in line with our base case price deck
Production increasing to 1.8 million barrels of oil equivalent per day by 2026 as expansion projects ramp up
Capex of around
Dividends between
RATING SENSITIVITIES
QE
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Positive rating action on
An upward revision of the SCP is unlikely given the inherent volatility of the oil and gas industry and QE's upstream production concentration in a single country
Factors that could, individually or collectively, lead to negative rating action/downgrade:
The rating is on Positive Outlook therefore negative rating action is unlikely. However, the revision of the sovereign Outlook to Stable would be replicated for QE.
Negative rating action on
FFO or EBITDA net leverage rising to above 1x on a sustained basis (excluding JVs and/or based on proportionate consolidation basis) due to, for example, much higher-than-expected capex, which may be negative for the SCP but not necessarily for the IDR
Factors that could, individually or collectively, lead to negative rating action/downgrade:
External Finances: A deterioration in
Public Finances: Failure to stabilise general government debt/GDP at a level close to or below the 'AA' median, for example, due to a return to fiscal deficits, or an assessment that contingent liabilities are likely to crystallise on the sovereign balance sheet
Structural Features: A sharp escalation of regional geopolitical tensions that threatens
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Public Finances: Greater confidence that government debt will remain at a level close to or below the 'AA' median, for example, as a result of a prolonged period of fiscal surpluses, combined with a reduction of the risks associated with large contingent liabilities
External Finances: A substantial improvement in
Structural Features and Macroeconomic Policies: Improvement in structural factors such as reduction in hydrocarbon dependence and a strengthening in governance, while maintaining strong fiscal and external balance sheets
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Strong Liquidity: QE reported an unaudited cash balance of
Issuer Profile
QE is
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
The rating of QE is constrained by the sovereign rating.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
(C) 2023 Electronic News Publishing, source