Rosneft's $25 billion debt seen rising after Essar deal: Moody’s

The logo of the Russian state oil company Rosneft is pictured behind a pipe at the Samotlor oil field outside the West Siberian city of Nizhnevartovsk, Russia, January 26, 2016. REUTERS/Sergei Karpukhin

MOSCOW (Reuters) - The debts of Russia’s top oil producer Rosneft are likely to rise as a result of its plan to buy a non-controlling stake in Indian oil refiner Essar Oil, Moody’s credit ratings agency said on Monday.

Rosneft, whose net debt stood at $24.5 billion at the end of September, hopes to conclude a deal to buy a 49 percent stake in the 400,000 barrel-per-day refinery in western India by the end of June.

Denis Perevezentsev, vice-president and lead Rosneft analyst at Moody’s, said the deal would be credit negative as it could increase the Russian company’s leverage, while not offering any clear benefits.

In a note, Moody’s estimated that Rosneft could pay $2-$3 billion for a 49 percent stake in Essar Oil.

“The deal’s structure has not yet been disclosed, but Rosneft is likely to increase its debt by the amount of the deal if it or a subsidiary purchases the asset for cash,” Perevezentsev told Reuters.

Rosneft, under Western sanctions over Moscow’s role in the Ukraine crisis which limits its ability to borrow on global markets, will have to repay about $13.7 billion this year.

Moody’s also said it treated as a debt-like item the pre-payments of about $43.4 billion received by Rosneft last year under long-term oil and oil products supply deals. Rosneft is yet to publish its full-year 2015 results.

Reporting by Denis Pinchuk; Editing by Katya Golubkova and Mark Potter