Energy Development Oman outlook revised to positive

Leading international rating agency S&P Global Ratings has revised wholly Omani governmentowned Energy Development Oman’s (EDO) outlook to positive from stable.

It comes on the heels of S&P’S recent revision of its outlook on Oman to positive from stable, based on the view that the government’s balance sheet will strengthen and the economic reform programme could lead to faster-than-expected deleveraging in many state-owned enterprises — without dampening economic growth outcomes — and boost the economy’s resiliency to adverse oil price shocks.

“Given EDO’S integral link with the government and because we think the government can influence the company’s strategic plans via its significant presence on the board, we cap our rating on EDO at the level of the sovereign under our criteria.

“In light of the upgrade to the sovereign, our issuer credit rating on EDO is one notch below our assessment of the company’s ‘bbb-’ standalone credit profile (SACP),” the rating agency stated.

It further added: “We consider EDO a government-related entity (GRE) with a moderately high likelihood of government support and expect it will remain a key player in Oman’s energy sector. Our assessment reflects our view that the company has an integral link with the government, given the state’s 100 per cent direct ownership of EDO. “The government also has a strong influence on the company’s strategic plans, via its significant presence on the board, which the minister of energy and minerals chairs.

“The assessment also reflects our view that EDO plays a very important role for the Omani government because it is the largest oil and gas producer in Oman — through its 60 per cent ownership of Petroleum Development Oman (PDO; contributing about 50 per cent of hydrocarbon production — and therefore a significant employer.”

According to S&P, EDO’S stand-alone credit profile (SACP) remains at ‘bbb-’ and is supported by the company’s leading share in Omani hydrocarbon production and overall good cash flow visibility.

Factored into the agency’s business risk assessment is EDO’S access to large reserves, with more than 1.5 billion barrels of oil equivalent in 1P reserves and include more than 60 per cent of Oman’s 1P oil and nonassociated gas condensate (NAGC) reserves; leading domestic share of hydrocarbon production; and broadly low operating cost structure. The company has ongoing and new expansion projects in both oil and gas to develop and upgrade existing wells, noted S&P.