Muscat – Fitch Ratings has affirmed Energy Development Oman’s (EDO) long-term issuer default rating at ‘BB+’ with a stable outlook. The global rating agency has also affirmed EDO’s senior unsecured rating at ‘BB+’.

According to a statement from Fitch, EDO’s rating is constrained by the rating of its sole shareholder, the Government of Oman, due to their close relationship, in accordance with Fitch’s government-related entities (GRE) rating criteria.

‘Under our GRE rating criteria, we assess the precedents of support as ‘strong’ and the decision-making and oversight, preservation of government policy role, and contagion risk as ‘very strong.’ This assessment results in an overall GRE score of 55 points out of a maximum of 60,’ Fitch said.

Fitch also noted that EDO’s standalone credit profile (SCP), rated at ‘bbb+’, reflects the company’s history of maintaining a prudent financial profile, along with successfully sustaining the size and scale of its reserves and production within the current fiscal framework.

‘The SCP is supported by EDO’s large-scale oil and gas operations, strong and resilient cash flow generation – thanks to contracted gas sale prices and a flexible royalty framework – a flexible dividend policy, and low leverage,’ the rating agency added.

However, Fitch pointed out that EDO’s SCP is limited by its operations being confined to a single country, unlike peers with an international presence. Additionally, the company’s purely upstream-focused business model and relatively mature reserve base with a lower proved reserve life compared to peers also constrain its SCP.

EDO is the largest oil and gas producer in Oman, primarily through its interest in Petroleum Development Oman (PDO).

Fitch commented, ‘PDO operates the onshore Block 6 oil and gas concessions, which cover over 24% of Oman’s land area and have a production history spanning more than 50 years. This somewhat mitigates the impact of EDO’s focus on a single country of operations. We expect an average output of over 800,000 barrels of oil equivalent per day until 2028 in our rating case.’

Fitch expects EDO to maintain a strong financial profile through 2028, even with increasing capital expenditures, royalties, and tax payments to the government, under its base-case oil and gas price scenario.

Regarding EDO’s carbon footprint, Fitch noted that the company continues to reduce greenhouse gas emissions from operations and flaring while also improving energy efficiency.

‘PDO also aims to expand its renewable power generation capacity to up to 30% of total capacity in the medium term. We view EDO’s and PDO’s environmental targets as broadly in line with Middle Eastern peers but trailing behind large European peers such as TotalEnergies, BP, or Eni,’ the agency said.

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