Moody’s has assigned an A2 rating to PETRONAS Capital Limited’s USD-denominated senior unsecured notes, guaranteed by PETRONAS, reflecting the company’s robust credit profile. The rating is underpinned by PETRONAS’ strong fundamentals, including its large hydrocarbon reserves, solid financial metrics (e.g., net cash position), prudent financial management, and excellent liquidity. These strengths support its baseline credit assessment (BCA) of a2, with projected metrics like 19%-20% debt/capitalization and 12x-13x EBIT/interest through 2025-26, even under a moderate Brent oil price range of $55-$75 per barrel. The stable outlook signals confidence in PETRONAS’ ability to maintain its creditworthiness despite market fluctuations.
PETRONAS’ MTN
However, the rating also highlights vulnerabilities. PETRONAS’ heavy reliance on Malaysia for its oil and gas reserves introduces geographic concentration risk, while its downstream operations lag in scale compared to peers. Financially, EBITDA is expected to decline to MYR100-MYR110 billion in 2025-26 from MYR126 billion in 2024 due to lower oil prices, alongside significant capital spending (MYR50-MYR60 billion) and dividend commitments (MYR32 billion). Potential government pressure for higher dividends poses an additional risk, though PETRONAS’ cash reserves provide a buffer.
Gas production
A key uncertainty lies in the ongoing gas distribution negotiations in Sarawak, a critical region for PETRONAS’ gas production. The Sarawak government’s push for PETROS to assume control could disrupt earnings and cash flows, a development Moody’s views as credit negative if it materializes. While not yet factored into forecasts, this situation warrants monitoring.
In summary, PETRONAS’ A2 rating reflects a balance of resilience and risks, with its financial strength tempered by concentration risks, potential government demands, and unresolved regional challenges. The stable outlook hinges on its ability to navigate these pressures effectively.
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