News 2022February 2021
The international rating agency S&P has downgraded Tengizchevroil's credit rating from BBB to BBB-. The rating outlook is stable.
“Given the high industry risk, coupled with existing restrictions in TCO's business, such as concentration of one field and one pipeline, and relatively high transportation costs, we believe that TCO's business risk has worsened. Therefore, we downgrade our rating of TCO and its priority secured debt from BBB to BBB-. The stable outlook reflects our view that the company will maintain its debt-to-EBITDA ratio below 3x and gradually reduce leverage once the expansion project is launched, the agency explained.
The organisation added that the risk in the oil and gas industry is moderately high.
S&P added that, despite the fact that the Caspian Pipeline Consortium pipeline has a solid reputation in operation, disruptions in its operation with a length of 1.5 thousand kilometres could block TCO's exports, since there are no alternative ways to sell oil of comparable capacity. With the implementation of the Future Growth Project (FGP/WPMP), dependence on CPC will only increase. The pipeline is also called a relatively expensive vehicle.
Support from Chevron and ExxonMobil continues to support the ratings.
We expect that, according to the revised FGP/WPMP plan, TCO's large $45.2 billion expansion project will deliver the first oil in mid-2023. This will provide additional production of about 260 thousand barrels per day, explained S&P.
TCO's low costs remain a key benefit. Favourable concession terms, relatively low production costs and access to CPC facilities allow the company to generate above-average profitability, with a S&P Global Ratings calculated ROE of 28% in 2019 and a significant positive operating cash flow expected even at low revenues.