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Moody’s Ratings Affirms PETRONAS and PETRONAS LNG Ratings; Outlook Stable

On July 18, 2024, Moody’s affirmed PETRONAS’ A2 ratings for both local and foreign currency, citing strong credit metrics, large hydrocarbon reserves, and excellent liquidity. Similarly, PETRONAS LNG (PLL) retained its Baa1 ratings, with a stable outlook for both entities.

PETRONAS

Credit Strengths: Robust financial health, large hydrocarbon reserves, prudent financial management, and excellent liquidity.
Constraints: High geographic concentration in Malaysia and relatively small downstream operations.
Projections: Expected to generate MYR100-120 billion EBITDA annually in 2024-25, maintaining solid credit metrics despite high dividend payments to the Malaysian government.
Risks: Potential government requests for higher dividends and uncertainties around gas operations in Sarawak.
Liquidity: Strong, with cash holdings and short-term investments exceeding total debt by MYR95.3 billion as of March 2024.

PETRONAS LNG

Rating Basis: Strong operational and financial integration with PETRONAS, full ownership, and parent support.
Financial Support: Significant equity injections and access to PETRONAS’ umbrella credit facility for liquidity.

Outlook

Stable: Reflects PETRONAS’ strong cash balance and resilience against oil price volatility, and expected continued support and integration for PLL.

Factors for Rating Changes

PETRONAS: Ratings could be downgraded due to significant policy changes, large debt-funded acquisitions, or a downgrade of Malaysia’s sovereign rating. An upgrade would require an improvement in Malaysia’s rating and sustained strong credit metrics.
PLL: Dependent on PETRONAS’ ratings and parent support.

Overall, Moody’s highlights PETRONAS’ and PLL’s robust credit profiles, while acknowledging certain risks tied to government policies and market conditions.