PETALING JAYA: S&P Global Ratings has revised its rating outlook on Petroliam Nasional Bhd (Petronas) to “stable” from “negative” for foreign and local currency long-term ratings.
In a statement yesterday, S&P also said it affirmed its A local currency and A- foreign currency long-term issuer credit ratings on Petronas.
“We also affirmed our A- foreign currency issue ratings on the notes and sukuk trust certificates Petronas has issued or guaranteed.”
S&P said the stable outlook on Petronas mirrored the sovereign credit rating on Malaysia, given the rating agency’s view that the company remained sensitive to government intervention.
“Our outlook revision on the sovereign rating triggered the same action on Petronas. The outlook revision on the sovereign rating reflects our expectation that Malaysia’s steady growth momentum and strong external position will remain in place over the next two years.”
Though Malaysia’s budget deficits remain high, S&P said it expects the country’s growth dynamics to offset vulnerabilities associated with its weak fiscal settings.
“We believe Petronas will remain sensitive to potentially negative government intervention if the sovereign faces financial distress.
“Intervention could include exceptional taxation of dividends, or other measures that the government may impose to divert resources from the company.”
S&P said it therefore equalised the ratings on Petronas with its sovereign credit rating on Malaysia.
“The foreign currency rating on Petronas is four notches below the company’s aa stand-alone credit profile (SACP).
“This reflects the company’s ownership and control over Malaysia’s large hydrocarbon resources, low-cost integrated operations, sound reserve life and record of reserve replacement, net cash position, solid cash flow adequacy amid high margins across a pricing cycle, and conservative financial policies.
“The outlook also reflects our expectation that, over the next 24 months, Petronas will maintain its production of hydrocarbons, a conservative funding profile, and a solid balance sheet,” it said.
S&P said it may lower the rating on Petronas if it lowers its sovereign rating on Malaysia.
“We could also downgrade Petronas if its relationship with the sovereign changes materially and the company’s balance sheet and liquidity weaken significantly.
“We view this scenario as remote because it would require a substantial deterioration in the company’s aa SACP,” it said.