A better future is expected for the Russian oil giant after the US-based ConocoPhillips purchased its government block and intends to acquire another 2.4% block before the year's end.
The basic and emitter LUKoil ratings are confirmed at a respective Ba2 and Ba3.
ConocoPhillips' appearance among LUKoil stockholders will make the Russian company more efficient and productive, so its ratings are expected to go up fairly soon, says Moody's.
As strategic investor, ConocoPhillips is expected to have a spokesman on the LUKoil board, launch extra technical and corporate LUKoil management expertise, and enhance finance opportunities to develop several essential projects. As the LUKoil charter has it, certain matters demand board unanimity, points out the agency.
Upcoming contracts envisage a joint venture in the Timan-Pechora oil-and-gas bearing province. The partners also announced their intention to negotiate with the Iraqi administration to have LUKoil contract rights confirmed for West Qurna oilfield opening up.
Moody's positive forecast reflects efforts to improve LUKoil's basic activities-in particular, long-term strategies which, if successfully implemented, will guarantee lasting financial stability and enhance efficiency. LUKoil owes its profits to steadily increasing output and to steady expenditures. The company makes it a point to get rid of assets outside its principal specialization, while high petroleum prices account for cash flowing in, says the statement.
At the same time, Moody's highlights hazardous LUKoil capital investment, even though the company intends to draw its considerable part out of its own purse. More than that, its profits may shrink if petroleum prices go down and fiscal and transport expenditures up-that despite whatever exploitation improvements, warns the agency.