Standard & Poor's Improved Credit Rating of TNK International from Â+ to BB- and Awarded ÂÂ- Rating to TNK-BP
18 Nov 2003
Standard & Poor's international rating agency improved credit rating of TNK International Ltd /TNK/ from Â+ tî BB- and removed it from the CreditWatch list, in which it was placed on February 11, 2003. The forecast is positive, according to the agency's announcement. Standard & Poor's gave BB- rating to TNK-BP as a new legal entity that had become a 100% stockholder in TNK. Assets of these two entities are virtually equal: TNK secured 99.4% of operating cash flow of the group in the first half of 2003. "Ratings recognize TNK-BP's standing as that of the third largest company by reserves, production and export in the Russian oil industry, and on the other hand, the average level of its costs and high financial leverage," Eric Tangi, credit analyst at Standard & Poor's, noted. "Ratings do not account for the opportunity of direct support on the part of the new 50% stakeholder in the Group - BP PLC /AA+/Stable/À-1+/. However, they consider indirect positive impact on the company's business from the stockholder with high rating, expansive experience in the industry, professionalism, experienced management team and weighted financial policy," E. Tangi added. After SIDANCO's recent integration into TNK, TNK-BP has become Russia's third largest oil company. In 2002, production of companies that are now part of TNK-BP came to 1,115 thousand barrels, and proven reserves as of the end of 2002 stood at 9.4 billion barrels. The bulk of the company's oil producing assets is located in Russia. During the first half of 2003, production increased by 10% to 1,229 thousand barrels a day, whereas export of oil and petroleum products exceeded 75% of total production. Standard & Poor's expects TNK-BP's financial profile to improve in the near future as the company uses a portion of its available cash flows to reduce its debt. Slashing costs, synergetic effect of TNK's and SIDANCO's business combination, improvement in interaction between the Group's production enterprises and gradual integration of 50% of Slavneft's assets are expected to have positive effects on business parameters. Rating will still depend on TNK-BP's ability to generate cash flows against the background of considerable oil price abatement, ongoing cost inflation as well as on the company's willingness to adjust capital spending and dividends so that to fund them using its own sources, rather than by acquiring new borrowings. Source: PRIME TASS
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