Fitch upgrades TNK-BP

Fitch Ratings said it upgraded TNK-BP International Ltd.'s $700 million senior unsecured eurobond to BBB-from BB+, local- and foreign-currency issuer default ratings to BBB- from BB+ and short-term rating to F3 from B.

The outlook is stable.

The agency said the upgrade is based on TNK-BP's continued improvements to the company's business profile in both the upstream and downstream segments and on the company's strong profitability and cash flow generation. TNK-BP has undertaken a program to rationalize its upstream portfolio, which includes not only divesting some assets such as Udmurtneft, but also bringing forward capital expenditure plans for greenfield development at Uvat and Verknechonskoye.

As of September, TNK-BP increased upstream capital expenditure by 57% to $1.49 billion compared to the same period last year. Fitch commented that TNK-BP now seems to have a better understanding of its upstream resources available for development and has developed a well-defined plan to monetize them. In the downstream segment, as of September, TNK-BP spent $151 million, a 30% decrease over the same period last year, as the company has completed the majority of its modernization plans at the Ryazan oil refinery.

While the company has plans to increase borrowings, funds are to be used for development spending, rather than acquisitions, and are not expected to lead to a material deterioration in its credit metrics, the agency said. The net debt-to-EBITDAR ratio is expected to remain around 1x.

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