Expert RA Agency has Affirmed the Credit Rating of Rosneft Oil Company at the Highest Level, the Forecast is Stable

The Russian rating agency Expert RA has confirmed the credit rating of Rosneft at the highest level – ruAAA, with a stable outlook on the rating.

Expert RA assesses the competitive position of Rosneft as strong, including due to large proven hydrocarbon reserves and low production costs. The agency also emphasizes the successful implementation of the Vostok Oil project, the fields of which contain significant oil reserves.

The Vostok Oil project is currently one of the most promising in the world. Its resource base is over 6 billion toe. In terms of quality characteristics, oil from the fields of the project is superior to the Brent grade, it is light (40% API) and low-sulfur (sulfur content <0.05%).

An important component of the project is its environmental friendliness. In particular, within the framework of the Vostok Oil implementation, the complete utilization of associated petroleum gas is envisaged, which will provide the project with a “carbon footprint” 75% lower than that of other new major oil projects in the world. The logistics advantage of the Vostok Oil project is the ability to supply raw materials from the fields in two directions at once – to the European and Asian markets.

At the end of 2020, a large international trader Trafigura acquired a 10% stake in the Vostok Oil project. On June 10, Rosneft announced the signing of an agreement on the basic terms of a deal to sell a 5% stake in Vostok Oil to a consortium of companies comprising Vitol SA and Mercantile & Maritime Energy Pte. Ltd.

According to the Expert RA agency, Rosneft’s projected operating cash flow with a large margin covers the Company’s expenses on debt repayment and servicing, capital expenditures and dividends.

Expert RA expects improvement in Rosneft’s financial performance, including a significant reduction in its debt burden. A similar opinion was expressed by experts from international credit rating agencies Moody’s and S&P, which had previously published their reports on the Company.

The Russian rating agency also notes the high quality of corporate governance of Rosneft, a high level of information transparency, a long-term development strategy and a high quality of risk management.

Expert RA considers the diversified client base of Rosneft, the absence of dependence on hard-to-replace suppliers, as well as the absence of concentration of production assets affecting the rating as positive factors.