Hong Kong, December 16, 2019 -- Moody's Investors Service has affirmed the A1 issuer rating of China
National Petroleum Corporation (CNPC).
At the same time, Moody's has affirmed the (P)A1 senior unsecured
rating of the euro medium-term note (EMTN) program issued by CNPC
General Capital Limited and guaranteed by CNPC.
Moody's has also affirmed the following ratings:
A2 issuer rating of CNPC Finance (HK) Limited (CPF HK), the key
offshore treasury subsidiary of CNPC, and the P-1 short-term
rating for CPF HK's commercial paper programs;
A2 senior unsecured rating for bonds issued by CNPC General Capital Limited
and CNPC (HK) Overseas Capital Ltd. The notes are guaranteed by
CPF HK and ultimately supported by CPF HK's immediate parent,
China Petroleum Finance Company Limited (CPF), and its ultimate
parent, CNPC in the form of keepwell agreements.
The outlook for the ratings is stable.
RATINGS RATIONALE
The rating affirmations reflect Moody's expectation that CNPC will
maintain its strong credit profile over the next 2-3 years.
Moody's says that CNPC will likely maintain adjusted retained cashflow
(RCF)/net debt at around 130% in 2020, based on a price assumption
of $60 per barrel for Brent in 2020. Such a leverage level
is strong for its a1 Baseline Credit Assessment (BCA) when compared with
rated global oil majors.
CNPC's A1 issuer rating is underpinned by its BCA of a1, and
Moody's assessment of a very high level of dependence on,
and very high likelihood of support from the Government of China (A1 stable),
in times of need.
CNPC's BCA is underpinned by its (1) balanced upstream and downstream
business portfolio; (2) very large reserve and production scale;
(3) dominant position in China's oil and gas markets; and (4) strong
financial metrics and liquidity profile.
The very high likelihood of government support reflects CNPC's high
strategic importance to China, as the largest national oil company
by oil and gas reserves and production volumes.
The very high dependence level reflects the fact that (1) CNPC shows strong
institutional linkage with the Chinese government; and (2) CNPC and
the government are exposed to common political and economic risk factors.
The rating also considers the following environment, social and
governance factors:
First, CNPC's main oil and gas exploration and production
businesses are exposed to elevated carbon transition risk over the long
term. However, such risk is mitigated by CNPC's dominant
market position in China, and the country's sustained demand for
oil and gas. As China's reliance on imported oil and gas rises,
maintaining stable domestic production is important for the Chinese government.
And, as the largest supplier of natural gas in China, CNPC
is less exposed to carbon transition risk, because natural gas has
a lower environmental impact than other fossil fuels.
In addition, CNPC's sound track record of operating in the oil and
gas exploration and production sector mitigates its exposure to accidents
and environmental hazards.
Lastly, CNPC demonstrates a good level of transparent information
disclosure, given that its core operating subsidiary, PetroChina
Limited, is listed on multiple stock exchanges and CNPC also discloses
its annual reports and each quarter's financials in the domestic
bond market.
CPF HK's A2 rating reflects its close linkage with its parent,
CPF, and its ultimate parent, CNPC. CPF and CPF HK
are strategically important to CNPC, because they manage CNPC's
onshore and offshore treasury operations. The keepwell agreements
from CPF and CNPC, which cover CPF HK's general debt obligations,
reinforce Moody's assumption of a high likelihood of extraordinary
parental support for CPF HK.
The stable outlook on CNPC's rating reflects Moody's expectations
that over the next 12-18 months (1) CNPC's BCA will remain
appropriately positioned at its current level; and (2) CNPC's importance
to the Chinese government and the government's ability to support
the company will remain intact, the latter of which is mirrored
in the stable outlook on China's sovereign rating.
Moody's could upgrade CNPC's rating if the Chinese government's
ability to provide support strengthens, which would be illustrated
by an upgrade of the sovereign rating.
But Moody's would downgrade CNPC's rating if the Chinese government's
ability to provide support weakens, which would be illustrated by
a downgrade of the sovereign rating.
Moody's could downgrade CNPC's BCA to a2 if the company embarks
on large debt-funded acquisitions or crude oil prices experience
a further sharp drop beyond Moody's expectations, such that
CNPC's RCF/net debt falls and remains below 60% over a prolonged
period.
However, a moderate weakening in the company's BCA is unlikely to
lead to a downgrade of its A1 rating, given the very high likelihood
of extraordinary support from the Chinese government.
CPF HK's rating is closely linked to that of CNPC. As such,
an upgrade of CNPC's rating would trigger an upgrade of CPF HK's
rating. Similarly, a downgrade of CNPC's rating would
trigger a downgrade of CPF HK's rating.
The methodologies used in these ratings were Integrated Oil and Gas Methodology
published in September 2019, and Government-Related Issuers
published in June 2018. Please see the Rating Methodologies page
on www.moodys.com for a copy of these methodologies.
China National Petroleum Corporation (CNPC) is the largest oil & gas
company in China by production volume. It is wholly owned by China's
State Council and ultimately, the Chinese government. The
company's revenue totaled RMB2.74 trillion for the fiscal
year ended 31 December 2018.
CNPC Finance (HK) Limited (CPF HK) is a wholly owned offshore subsidiary
of China Petroleum Finance Company Limited, which is in turn a treasury
subsidiary of CNPC. At the end of 2018, CPF HK had total
assets of around $27.2 billion and an equity base of around
$3.0 billion.
The local market analyst for these ratings is Kai Hu, +86 (21)
2057-4012.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Moody's considers a rated entity or its agent(s) to be participating
when it maintains an overall relationship with Moody's. Unless
noted in the Regulatory Disclosures as a Non-Participating Entity,
the rated entities are participating and the rated entities or their agent(s)
generally provide Moody's with information for the purposes of its
ratings process. Please refer to www.moodys.com for
the Regulatory Disclosures for each credit rating action under the ratings
tab on the issuer/entity page and for details of Moody's Policy
for Designating Non-Participating Rated Entities.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Chenyi Lu
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Gary Lau
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
