Moody’s confirms Qatari project finance ratings with negative outlook

Ratings agency Moody’s said it has completed the assessment of LNG producers RasGas 2 and RasGas 3, as well as LNG shipping giant Nakilat as part of its review initiated in March.

Moody’s has confirmed the Aa3 guaranteed senior secured debt ratings of RasGas 2 and RasGas 3, and the agency has also confirmed the Aa3 senior secured debt ratings and the A1 senior subordinated debt rating of Nakilat. The outlook on the ratings is negative, Moody’s said in a statement on Monday.

The rating actions follow Moody’s 14 May confirmation of the Aa2 government bond and issuer ratings of Qatar, with negative outlook, and reflects that each of RasGas 2, RasGas 3 and Nakilat is a government related issuer (GRI).

“The ratings of RasGas 2, RasGas 3 and Nakilat incorporate Moody’s assumption that in the unlikely event that any of these issuers were to become distressed, there would be a high likelihood of extraordinary support from the Government of Qatar to avoid a default on their debt obligations. Moody’s assumption of high support leads to a significant uplift from the standalone credit strength, or baseline credit assessment (BCA), of the projects,” Moody’s said.

RasGas 2 and RasGas 3 are LNG liquefaction companies in Qatar. The project engages in the upstream production of natural gas, gas treatment and liquefaction, and the export of LNG.

Moody’s said it considers RasGas 2-3 as a single entity from a credit perspective since all senior secured debt raised by RasGas 3 is unconditionally and irrevocably guaranteed by RasGas 2, and vice versa.

The shareholders of each of RasGas 2 and RasGas 3 are Qatar Petroleum (70%) and ExxonMobil (30%).

As part of its review, the rating agency said it assessed the impact of sustained low oil prices on the standalone credit strength of RasGas 2, RasGas 3 and Nakilat, and affirmed the BCA for each of them.

Moody’s expects that the standalone credit strength of RasGas 2 and RasGas 3 will, as a result of strong base case financial metrics, be resilient in a low hydrocarbon price environment.

The rating agency estimates that the minimum debt service cover ratio (DSCR) breakeven oil price for the two producers is below $15 per barrel.

In the case of Nakilat, the availability-based revenues payable under long-term time charter party agreements ensure that Nakilat’s revenues are not exposed to commodity price volatility, Moody’s said.