RPT-Fitch Affirms OAO Tatneft at 'BB+', Stable Outlook
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June 20 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed OAO Tatneft's Long-term Issuer Default Rating (IDR) at 'BB+'. The Outlook is Stable. A full list of rating actions is at the end of this release.
KEY RATING DRIVERS
Relatively Small Scale, Lack of Diversification
With the daily output of 0.51m barrels of oil equivalent (boe), Tatneft is a small- to medium-sized oil company. The company's major assets are located in the Republic of Tatarstan, Russia (BBB-/Stable). The company's largest deposit Romashkinskoye provides up to 60% of the total crude oil output.
Comfortably Long Reserve Life
As of January 2013 the company had 6.2bn bbl of crude oil and condensate reserves which provide 33 years of reserve life with 2012 output of 187.4m bbl - the longest amongst Russian peers. However, oil reserves are mature, which results in higher lifting costs compared with Russian peers. In 2012, the company reported average lifting costs of RUB220 per 1 bbl (+9.5% yoy).
Full Utilisation of Taneco Refinery in 2012
In December 2011, the company commissioned the Taneco refinery plant with an annual capacity of 7mmt. It was fully utilised in 2012 with 6.9mmt of refined products output. Up to 30% of the company's crude oil is currently refined in Taneco.
The change of the company's sales structure in favour of refined products and domestic market lowered the relative amount of export duties to 29.1% of gross revenue in 2012 compared with 32.2% in 2011. As a result, the company improved its EBITDAR per 1 bbl of crude oil output in 2012 by 16% yoy to RUB653 from RUB565 in 2011. Fitch views positively the change in the company's business model due to the commissioning of Taneco.
Conservative Capital Structure
The company has a conservative capital structure with funds from operations (FFO) adjusted gross leverage of 0.68x at end-2012. Fitch expects Tatneft to show positive free cash flow in 2013-2014, which will contribute to further deleveraging to 0.5x by end-2013 and to 0.2x by end-2014. Fitch's base case expectations do not include Tatneft's possible investments in the doubling Taneco's capacity.
Positive: Future developments that could lead to positive rating actions include:
- FFO adjusted gross leverage sustainably below 1.0x
- FFO interest coverage above 10.0x
- Ability to maintain stable crude oil output
Negative: Future developments that could lead to negative rating action include:
- FFO adjusted gross leverage sustainably above 2.0x
- FFO interest coverage below 10.0x
FULL LIST OF RATING ACTIONS
Foreign currency Long-term IDR: affirmed at 'BB+'; Stable Outlook
Foreign currency Short-term IDR: affirmed at 'B'