BAKU: Moody’s expects the profitability of Azerbaijan’s state oil company SOCAR to remain relatively stable in 2024-2025, Trend reports via Moody’s.

‘While SOCAR’s financial performance weakened in 2023, compared with a record high in 2022, as the average Brent crude oil price declined to $83 per barrel from $101 per barrel over this period, it still remains sound. The company’s Moody’s-adjusted EBITDA margin was 9.1% in 2023, compared with 11.8 percent in 2023, 8.7 percent in 2022 and 6.2 percent in 2020. SOCAR also generated positive free cash flow (FCF) for the third year in a row thanks to solid operating cash flow, moderate capital spending and modest shareholder distributions. We expect the company’s profitability and cash generation to remain relatively stable in 2024-25,’ said the rating agency.

Moody’s notes that the company’s liquidity is healthy.

‘Its cash balance of 8.6 billion manat as of year-end 2023 and forecasted cash generation of around 2.0 billion manat over 2024-25 should be sufficient
to cover estimated debt maturities of 9.3 billion manat over this period,’ said the agency.

Moody’s Ratings has today changed to positive from stable the outlook of SOCAR.

‘SOCAR’s credit quality reflects its (1) key role in the oil and gas sector of Azerbaijan and its importance to the national economy; (2) sustainable hydrocarbon production volumes in 2021-23, although some declines were registered in the first half of 2024; (3) close links with the Azerbaijan government, which has accumulated substantial reserves and should be in a position to provide financial support to the company if needed; and (4) more discipline in strategic and financial management of the company, which was demonstrated by the state recently.

However, the company’s rating also takes into account its (1) sizeable trading operations which reduce its consolidated margins, inflate leverage through the use of short-term debt and limit predictability of financial results because of the inherent volatility of these activities; (2) gover
nance considerations, including its complex organisational structure, limited transparency and disclosure, and concentrated ownership which may lead to rapid changes in its strategy and financial profile; and (3) high operational concentration in Azerbaijan,’ says Moody’s.

Source: Trend News Agency