S&P gives Oman oil and gas firm EDO ‘BB-‘ rating

The S&P Global logo is displayed on its offices in the financial district in New York City, U.S., December 13, 2018. REUTERS/Brendan McDermid/File Photo

DUBAI, Aug 3 (Reuters) – S&P Global Ratings assigned Oman state oil and gas producer Energy Development Oman (EDO) a “BB-” rating with a stable outlook, citing access to sizeable hydrocarbon reserves and a leading share of Omani production.

EDO’s low operating cost structure, along with its reserves and market share, all support cash flow visibility, the rating agency said. The rating is in line with Oman’s sovereign rating.

EDO, set up in late 2020 to take majority ownership of Oman’s largest oil block called Block 6 and to help raise debt, raised a $2.5 billion loan last August.

Omani media outlet WAF News Agency reported in November that EDO would raise around $1.5 billion through a bond sale, depending on market conditions, citing Oman’s then-energy and minerals minister, who was replaced in June.

“We view positively the company’s access to sizable reserves via concession agreements until 2044. These total more than 1.5 billion barrels of oil equivalent (boe) in proven (1P) reserves and include more than 60% of Oman’s 1P oil and nonassociated gas condensate (NAGC) reserves,” S&P said.

It also cited as positive a proven track record of reserve replacement and execution of complex megaprojects, as well as fixed gas prices for domestic consumption helping offset oil price volatility. A low breakeven cost comparable to regional peers also supports cash flow resilience, even in low price environments, S&P added.

But the rating agency said the company’s strengths were “somewhat offset by its significant geographical and upstream concentration.”

“Our assessment is balanced by EDO’s high asset concentration in Oman, where it has 100% of its assets, albeit distributed across more than 200 fields in Block 6, which accounts for most of the country’s reserves.”

The rating agency added that EDO is primarily focused on upstream operations while another state company, OQ, is focused on downstream operations like refining and petrochemicals.

OQ also owns gas pipeline infrastructure, though EDO owns oil pipelines and five gas processing plants.

Reporting by Yousef Saba; editing by David Evans

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