Fitch said it has upgraded the rating of the company's $700 million eurobond to 'BBB-' from 'BB+'; the $5 billion guaranteed debt issuance program to 'BBB-' from 'BB+' as well as the $1.5 billion of notes currently outstanding under the program; the local and foreign currency Issuer Default Ratings (IDR) to 'BBB-' from 'BB+' and the Short-term rating to 'F3' from 'B'.
"The upgrade is based on TNK-BP's continued improvements to the company's business profile in both the upstream and downstream segments. TNK-BP has undertaken a program to rationalize its upstream portfolio, which includes not only divesting some assets such as Udmurtneft, but also bringing forward capital expenditure plans for greenfield development at Uvat and Verknechonskoye," the agency said.
"As of September 2006, TNK-BP increased upstream capital expenditure by 57% to $1.49 billion compared to the same period last year. Fitch comments that TNK-BP now seems to have a better understanding of its upstream resources available for development and has developed a well defined plan to monetize them," Fitch said.
"In the downstream segment, as of September 2006, TNK-BP spent approximately $151 million, a 30% decrease over the same period last year, as the company has completed the majority of its modernization plans at the Ryazan oil refinery. The company's aggregate refining capacity was 31 million tons in 2006," Fitch said.
"The ratings upgrade is further supported by TNK-BP's strong profitability and cash flow generation. Fitch expects the company to maintain a minimum EBITDA and operating cash flow of around $5 billion during the next several years as it stabilizes production costs and continues to replenish reserves with efficient finding and development expenditure," the agency said.
