S&P turns S-Oil view to positive

S&P said it revised S-Oil Corp.’s outlook to positive from stable and affirmed its BBB issuer rating.

“The positive outlook on S-Oil reflects our view that the company's credit metrics can secure a sufficient buffer over the next 24 months against its proposed significant investments. We base this on the back of oil prices and key product spreads improving from the bottom of the cycle level in the past two years. The company recorded a strong operating profit of Korean won (KRW) 2.1 trillion in 2021, and KRW 1.3 trillion in the first quarter of 2022. Inventory gains from the oil price hike, as well as demand recovery and improved product spreads resulted in strong revenue and EBITDA,” the agency said in a press release.

However, S&P said it forecasts S-Oil’s operating performance will deteriorate again due to a trend of reversing in oil prices and weak fundamental demand.

“As such, we estimate S-Oil's ratio of debt to EBITDA will trend back to 2x-3.5x in 2022-2024. However, this is still below our upside trigger of 3.5x,” the agency said.

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