Fitch affirms state-run PetroVietnam's rating at BB with stable outlook

Fitch Ratings has affirmed Vietnam Oil and Gas Group's (PetroVietnam) Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB' with a Stable Outlook.

Fitch affirms state-run Vietnam Oil and Gas Group at BB with stable outlook.

PVN's IDR is capped by that of its parent, the Vietnam sovereign (BB/Stable), under Fitch's Government-Related Entities (GRE) Rating Criteria, stated the rating agency, adding the company is wholly owned by the state, which exerts significant influence over its operating and financial policies. 

Meanwhile, Fitch assesses PVN's Standalone Credit Profile (SCP) at 'bb+', reflecting the company's conservative financial profile, diversification and integration. Such assessment is support by PVN's position as Vietnam's largest upstream oil and gas producer, which has exclusive rights to Vietnam’s oil and gas reserves by regulation.

Fitch expected PVN’s earnings before interest, taxes, depreciation and amortization (EBITDA) to fall by about 55% and 30% in 2020 and 2021, respectively, from 2019, amid the weak oil price environment. 

However, it is expected that PVN would continue to maintain a net cash position over the next two years, as Fitch anticipated a delay in PVN expansion plans. Fitch believed the earnings of PVN's upstream, refining and oil distribution segments will be dampened severely in 2020. However, earnings from its gas distribution, fertilizer and power businesses would remain relatively stable, Fitch added.

PVN holds interests in all of Vietnam's upstream oil and gas assets, accounts for about a third of the country's refined product output, and supplies gas for power plants that make up about 15% of Vietnam's power generation. PVN also accounts for about 80% of Vietnam's fertilizer production.