MUSCAT: OQ, the integrated energy group of Oman, raised around $2.5 billion from initial public offerings (IPOs) of two of its subsidiaries OQ Exploration & Production (OQEP) and OQ Base Industries (OQBI) during the fourth quarter – one of several financial milestones that that have underscored the state-owned firm’s strong fiscals in 2024.

On Tuesday, December 24, 2024, international ratings agency Fitch Ratings revised OQ’s outlook to Positive from Stable, while affirming its Long-Term Issuer Default Rating (IDR) at 'BB+'. Driving this ratings revision, it said, were a number of factors, most notably OQ’s strong links with the Omani government through its parent holding company Oman Investment Authority (OIA). This is evident from the significant support received from the government in the form of equity injections, asset transfers, shareholder loans and debt guarantees, Fitch noted.

The ratings upgrade comes on the heels of a similar revision of the Outlook on Oman's sovereign rating last week. Citing an improvement in finances, Fitch revised its outlook on Oman to “positive” from “stable,” – a move that puts the Sultanate on track to be rated as investment grade by all three major rating agencies.

“OQ's rating is constrained by that of Oman (BB+/Positive), as underlined by its strong links with its ultimate sole shareholder, the Omani state, in line with Fitch's Government-Related Entities (GRE) Rating Criteria and Parent and Subsidiary Linkage (PSL) Rating Criteria. OQ is fully owned by the state via Oman Investment Authority (OIA) and was established to strengthen and centralise Oman's oil and gas industry,” said Fitch in its commentary on OQ’s latest rating revision.

Referencing OQ’s successful IPOs of the current quarter, Fitch noted that the group, while raising sizable proceeds, continues to retain its majority stakes in OQEP and OQBI post-IPOs. The proceeds generated from these IPOs are expected to go towards debt prepayment, dividends, and also certain strategic growth projects such as expanding its gas network capacity and fuel storage.

In another notable highlight, OQ generated over $3.9 billion of EBITDA in 2023, from working-interest upstream production of 227k barrels of oil equivalent per day (boepd). OQ subsidiary OQEP has investments in a portfolio of 14 oil and gas assets, producing hydrocarbons (working interest) that represented around 14 per cent of the country’s total oil, gas and condensate production in 2023.

Also of note is OQ’s track record in prepaying debt by using cash flow generation and proceeds from asset sales. The group achieved a net debt repayment of about $1.3 billion in 2023, effectively slashing its debt to $9.5 billion at end-2023. This figure is projected to further decline to about $8 billion by end-2024, said Fitch.

Reinforcing its strong fiscal position is its controlling interests in a number of key assets. “OQ is the main downstream company owning all domestic refining assets producing transport fuels for the Omani market and is tasked with increasing the value per barrel of extracted oil by further expanding its refining and petrochemical assets. It is also the exclusive operator of Oman's domestic natural gas transportation infrastructure. In 2022 OQ was appointed the national champion for clean energy and green hydrogen by the government and is the main developer of Oman's alternative energy projects,” Fitch added.

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