Romania's Romgaz gets Fitch rating ahead of FX bond issue

Rating agency Fitch assigned Romanian state-controlled natural gas group Romgaz (BVB: SNG) a first-time BBB- long-term Issuer Default Rating (IDR) with a 'stable' outlook.

The company's bb- Standalone Credit Profile (SCP) rating, in the region of speculative investments, benefits from a one-notch uplift as per the Government-Related Entities (GRE) Rating Criteria, the rating agency explained. This brings the state-controlled company to the investment grade region, in line with the country's sovereign debt.

The rating was issued in light of the FX bonds the company plans to issue to finance its investments.

Romgaz plans to develop Neptun Deep, a deepwater offshore project in the Romanian Black Sea. It acquired a 50% stake in the project from Exxon Mobil for EUR 1 billion in 2022 and it partners with OMV Petrom, Neptun Deep's operator.

With Rothschild Bank as its adviser, Romgaz has hired JP Morgan to lead a consortium of banks that will handle the sale of bonds on the foreign market under an MTN scheme intended to finance Neptun Deep, according to the latest available data.

The MTN scheme would reportedly have a size of EUR 1.5 billion, with a first EUR 500 million tranche issued in H2 this year. The company announced the EUR 500 million bond issue for H2 in January when unveiling the financial planning for 2024.

Regarding the company's rating attached by Fitch, the rating agency explains that the SCP reflects the company's dominant position in Romania's natural gas market, upstream production growth potential from the Neptun Deep and Caragele reservoir developments, and conservative financial policy.

Key rating constraints include its comparatively modest production scale, lack of geographic diversification due to its sole focus on Romania, the aging nature of its legacy gas assets, large capex, and manageable execution risk.

(Photo source: Facebook/Romgaz)