MOSCOW (MRC) -- Moody's Investors Service has changed the outlook of China National Petroleum Corporation's (CNPC) from positive to stable, reported Moody's on its site.
At the same time, Moody's has affirmed the Aa3 issuer rating of CNPC.
"Given CNPC's position as a government-related issuer (GRI) and its strategic importance in the national oil & gas sector, its Aa3 rating, which is on par with the sovereign, incorporates a very high level of support from the Chinese government, its 100% shareholder. Accordingly, a change in the sovereign rating or its outlook will lead to a corresponding rating or outlook change for the company," says Simon Wong, a Moody's Vice President and Senior Analyst.
CNPC's Aa3 rating combines 1) the company's baseline credit assessment (BCA) of a1, and 2) the very high level of support the government is likely provide in a distress situation.
CNPC's BCA of a1 rating is underpinned by 1) its large reserve base and strong operational profile; 2) its dominant position in China; and 3) its solid financial metrics and liquidity profile.
These strengths are counter-balanced by 1) the geopolitical and event risks associated with its fast pace of expansion overseas; and 2) the social and political responsibilities it bears -- as a pivotal state-owned enterprise.
The BCA of a1 also reflects structural subordination risk, given CNPC's holding company status.
An upgrade of China's sovereign ratings would result in a upgrade of CNPC. A downgrade of China's ratings would trigger a downgrade of CNPC. Downward rating pressure would also emerge if there is a material deterioration in CNPC's BCA, which is unlikely in the near to medium term, given its solid financial profile and strong market position.
Moody's says that its decision on 16 April to change the outlook of China's sovereign rating to stable from positive has no impact on the ratings of most of the country's non-financial government-related issuers, or state-owned enterprises.
As MRC informed previously, Moody's had recently changed China's outlook to stable from positive. Meantime, the rating agency affirmed China's government's bond rating of Aa3.
China National Petroleum Corporation (CNPC) is the largest oil & gas company in China in terms of reserves and production. It is wholly owned by the government, and is the largest state-owned enterprise in terms of assets, and second-largest in terms of revenue. Its oil & gas reserves of 23 billion boe and production of 1.67 billion boe also position it among the top five integrated oil & gas companies in the world. Its revenue in 2012 totaled RMB2,683 billion.
MRC