Moody’s Affirms QP Ratings With Stable Outlook

Global credit rating agency Moody's has affirmed Qatar Petroleum’s 'Aa3' long-term issuer rating as well as 'aa3' baseline credit assessment (BCA).

Moody's also assigned 'Aa3' ratings to QP's contemplated senior unsecured bond issuances. The outlook on all ratings is "stable".

"The affirmation of QP's rating reflects the expectation that QP will maintain a very strong financial profile despite the sizeable and partially debt-funded capital spending programme over the course of the next six years", Julien Haddad, a vice president – senior analyst, and the local market analyst on QP said.

"The affirmation of the rating also reflects the expectation that QP will execute the North Field East Expansion (NFE) LNG (liquefied natural gas) project on time and in line with budget given the company's track record in delivering mega projects," it said.

QP is contemplating to issue bonds in four tranches to partially fund its capital spending programme for the NFE, the Golden Pass in Texas, US, and two petrochemical projects in Qatar and the US.

According to QP, the company's capital spending share in these projects and a portion of the North Field South Expansion (NFS) LNG project will be approximately $35bn, spread over the next five years.

This assumes that QP will bring in partners for up to 30% of the NFE, said Moody's.

The total estimated investment for the NFE is $28.75bn and will increase Qatar's total LNG output by 43% to 110mn metric tonnes per annum (Mtpa) by 2025 from the current level of 77Mtpa.

The project will require the construction of four new LNG trains as well as offshore gas production facilities and pipelines to the onshore liquefaction trains.

The expansion, once completed, in addition to the LNG production, will also produce 4,500 tonnes per day of ethane, which will be partially used as a feedstock for a new petrochemical plant with a capacity of 2.08mn tonnes of ethylene per annum and due to start production by end of 2026.

Once completed, the NFE will strengthen QP's business profile, and Moody's said this is because demand for LNG is likely to remain sustained over a longer period of time compared to oil, given its approximately 30% lower carbon dioxide emissions per unit of energy.

The expansion will strengthen the company's already dominant market position in the gas, and particularly, LNG market.

Moody's expects the credit profile of QP, which has a good track record in executing mega projects, to remain strong over the investment period.

QP's 'Aa3' issuer rating reflects the combination of QP's BCA, a measure of its standalone credit profile, of 'aa3' and assumptions of very high dependence and very high support from the Qatari government. The rating of QP is aligned to that of the sovereign and the rating affirmation reflects Moody's view that the strategic importance of QP to the government remains unchanged.

QP's BCA is supported by the significant scale of Qatar's gas reserves, which are the world's third largest according to the BP Statistical Review of World Energy 2020; QP's strong LNG franchise, which had a global market share of more than 20% in 2020 (for Qatar); the low-cost nature of its operations as one of the cheapest LNG producers globally as well as strong operating efficiency; and very strong financial and liquidity profiles with a track record of maintaining strong metrics over time.

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