S&P revises on EM oil and gas

S&P took ratings actions on three oil and gas companies in Russia and Kazakhstan.

The agency revised its outlook on its BBB local currency rating on Russian Gazprom PJSC to negative from stable.

The foreign currency rating was affirmed at BBB-.

S&P expect Gazprom's ratio of funds from operations to debt will be below our 30% threshold for a BBB- stand-alone credit profile in 2020, with potential recovery in 2021-2022. Gazprom's FFO to debt was 74% in 2018, and we expect it was about 50% in 2019.

The ratings on all the other Russian hydrocarbon companies S&P rates are unchanged.

In Kazakhstan, outlooks on KazMunayGas NC JSC (KMG) and Tengizchevroil LLP were revised to negative from stable, and the ratings were affirmed.

In base-case scenarios for KMG and Tengizchevroil, S&P projects that both companies can improve their ratios to rating commensurate levels in 2021.

For KMG, the agency predicts S&P Global Ratings-adjusted debt to EBITDA will increase to 5.x-5.4x and FFO to debt will fall to 9%-13%, versus 2.54x and 27%, respectively, reported in 2019. At the same time, it expects KMG's credit metrics to recover in 2021, as the oil price rebounds to $50/bbl on average, with debt to EBITDA falling to 3.x-3.5x and FFO to debt improving to 18%-22%.

Tengizchevroil was revised to negative on the expectation that lower oil prices will cause the project's S&P Global Ratings-adjusted debt to EBITDA to shoot up to 3.1x-3.5x in 2020 from a moderate 0.65x in 2019, before recovering to 2.2x-2.6x in 2021.

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