Fitch affirms Petrovietnam rating at 'BB+' with stable outlook

Fitch Ratings on Wednesday affirmed the long-term foreign-currency issuer default rating (IDR) of national oil-gas group Petrovietnam at "BB+" with a "stable outlook."

Petrovietnam's ratings reflect its strong financial profile and market position as Vietnam's largest upstream oil and gas producer with strong vertical integration across midstream and downstream segments in the energy value chain.

The state-owned group's stable gas distribution operations and power generation earnings help offset its high-cost upstream operations and the lower complexity of its refinery, Fitch added.

Fitch also noted key factors for the ratings, including "very strong" state incentive support, favourable demand for refined products, gas-power operations boosting stability, and large capital expenditure (capex) to support growth.

Fitch said Petrovietnam's mature upstream operations and higher-cost structure relative to regional peers weigh down its standalone credit profile (SCP).

The rating agency expects lower upstream EBITDA on a production decline due to depletion and oil prices falling to the mid-cycle level in the next four years until Petrovietnam's upcoming Block B integrated gas and power project (Block B project) starts operating.

The rating agency also highlighted Petrovietnam's strong market position, accounting for 43% of installed refinery capacity domestically and supplying nearly 35% of domestic fuel demand in 2023.

Fitch stressed some key assumptions for its ratings, including global crude oil prices averaging $80 per barrel in 2024, $70 in 2025, and $65 in 2026-2027. Petrovietnam's capital expenditure can reach VND45 trillion ($1.78 billion) in 2024 and VND60 trillion ($2.38 billion) per annum thereafter.

In the first nine months of 2024, Petrovietnam earned revenues of VND736.5 trillion ($29.2 billion) and paid VND115.2 trillion ($4.57 billion) to the state budget. The giant's crude oil production in the period reached 7.43 million tons, up 20.7% year-on-year.

Electricity generation was 20.88 billion kWh, up 18.4% year-on-year. Fertilizer and petroleum production reached 1.39 million tons and 4.9 million tons, respectively. The two sectors can exceed the annual target, Petrovietnam said.