Abu Dhabi Oil Giant’s Credit Ranked AA as Aramco Seeks Rating

Cracking towers stand at the Ruwais refinery and petrochemical complex, operated by Abu Dhabi National Oil Co. (ADNOC), in Al Ruwais, United Arab Emirates, on Monday, May 14, 2018. Photographer: Christophe Viseux/Bloomberg

Abu Dhabi’s government-owned oil giant received the region’s highest credit rating as Middle Eastern producers, including the world’s largest Saudi Aramco, pursue international investors and seek new funds for expansion.

The assessment of Abu Dhabi National Oil Co. by Fitch Ratings and the expected rankings for Aramco are providing a rare peak into the finances of some of the world’s biggest and most secretive companies.

Adnoc said the increased transparency will help it “expand its partner and investor universe” as it builds refineries and chemical plants. Aramco plans to sell a $10 billion bond to finance the acquisition of petrochemicals maker Saudi Basic Industries Corp.

“Investors already looked at Adnoc as nearly sovereign and this is independent verification of a very strong credit profile,” said Abdul Kadir Hussain, head of fixed-income asset management at Dubai-based investment bank Arqaam Capital Ltd.

Adnoc is OPEC’s third-biggest oil producer and pumps most of the United Arab Emirates’ crude. It earned as much per barrel as Total SA and Royal Dutch Shell Plc, according to Fitch.

Fitch said Adnoc pumps 3 million barrels of oil equivalent a day, and its “funds from operations,” or FFO, was comparable to Total’s $31 a barrel and Shell’s $30 in 2017. That means that Adnoc earned between $30 billion and $35 billion that year.

Aramco’s “cash from operations” from its 13.5 million barrels of oil equivalent a day was $52.1 billion in the first half of 2017, Bloomberg News reported in April. Exxon Mobil, the world’s largest publicly listed company, reported cash flow from operations, a similar measure to FFO, of $36 billion in 2018.

Adnoc’s AA long-term credit rating is Fitch’s third-highest and is in line with the rankings for debt issued by the governments of Abu Dhabi and of Kuwait. Exxon Mobil has higher equivalent credit ratings from Moody’s and Standard & Poor’s than Adnoc, while Fitch doesn’t rate the U.S. producer.

Higher Than Sovereign

If Adnoc were an independent company, it would have received the higher rating of AA+. Adnoc accounted for more than 50% of Abu Dhabi’s “budget revenue and current external receipts” in 2016-2017, Fitch said, and there is “no legal mechanism that would prevent the state” from demanding higher payouts in the future.

Fitch said Adnoc’s management indicated that Abu Dhabi’s government hasn’t pressed the company to boost dividends in the past.

Adnoc’s stand-alone rating means “it’s possible that Aramco could be rated higher than the sovereign” Hussain said.

Unlike Aramco’s upcoming ratings which may precede a bond sale, Adnoc said it doesn’t plan to issue debt soon. One of the company’s units has previously secured the same AA rating from Fitch and issued a $3 billion bond secured by Adnoc’s crude pipeline.

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