Fitch affirms 'BBB-' rating on ONGC, outlook stable
Fitch Ratings has affirmed Oil and Natural Gas Corporation's (ONGC) rating at 'BBB-' with stable outlook. "ONGC's ratings are constrained by the ratings of the state of India (BBB-/Stable), its majority owner," Fitch said.
«We maintain ONGC's Standalone Credit Profile (SCP) at 'bbb+', which reflects ONGC's scale as the largest oil and gas (O&G) producer in India, its significant reserves and production, and its vertically integrated and geographically diversified business model.»
The SCP also considers Fitch's expectations that ONGC's credit metrics will improve over the financial years ending March 2024 (FY24) to FY27.
ONGC's credit strength, however, is counterbalanced by its long track record of declining domestic oil and gas production, which we expect to reverse over the next few years, though there is less certainty on its ability to sustain organic production growth through the cycle in the longer term.
«We believe ONGC's status, ownership and control by the sovereign is 'strong' due to the state's majority ownership and board appointments.
»ONGC receives subsidies and other government grants, although these are limited, given its strong credit profile. We expect the state to extend support to ONGC, if needed, due to its importance in India's energy security as the largest national upstream company and third-largest refiner and marketer of petroleum products," it said.
ONGC accounts for 68 per cent of domestic oil and gas production and a default would significantly affect its operations and investments, hampering India's energy security.
«We expect ONGC's domestic oil and gas production to increase by low single-digit percentages over FY24-FY27.
