Press Releases / 13.10.2016
Press Release as of 13.10.2016
«BerezkaGaz Ob» JSC
AK&M Rating Agency has affirmed the national scale credit rating of BerozkaGaz Ob JSC at 'A', sub-level 3, with a stable outlook.
The 'A' rating indicates that the Company is highly creditworthy. The risk of a failure to meet obligations in time is low, the full or partial debt restructuring risk is minimal. The rating assignment was based on the Credit Rating Methodology for Corporates (Issuers) and Financial Assets rev. January 23, 2014, including the amendments approved by the Methodology Committee on February 18, 2015).
BerozkaGaz Ob Joint Stock Company positions itself in the market as a company specializing in the efficient utilization of associated petroleum gases extracted at the Prirazlomnoye oil and gas field in Khanty-Mansi autonomous area - Yugra.
The credit rating of BerozkaGaz Ob JSC is supported by a high technology level and environmental commitment of the project implemented by the Company, a steady increase in sales revenue, growing assets, a high receivables turnover ratio, the Company's good financial viability, a reduction in the loan debt, a comfortable debt profile and high loan debt servicing efficiency.
The operation of an APG processing unit at Prirazlomnoye, the core element of BerozkaGaz Ob's business, contributes to the environmental program of Khanty-Mansi autonomous area – Yugra which assumes increasing the effective APG utilization percentage level in the region to 98-99% in the near future. Today's effective APG utilization level reaches 95%. This ensures a favorable administrative environment for the Company's current operations and offers further business development opportunities for BerozkaGaz Ob JSC in the region.
Sales revenue of BerozkaGaz Ob JSC has been growing steadily in the last five years. In the first half of 2016, the Company's revenue from sales increased by 4.3% year-on-year. For the 12-month period ending on July 1, 2016, BerozkaGaz Ob JSC earned RUB 1.96 billion, the highest revenue for whole period of its existence.
At the start of H1 2016, assets of BerozkaGaz Ob JSC reached a historic high exceeding RUB 5.7 billion. In the last two years alone, assets of BerozkaGaz Ob JSC increased by 54.7%. The growth of assets is certainly a powerful positive rating driver for the Company.
The receivables turnover ratio at BerozkaGaz Ob JSC is relatively high and steadily growing. In the first half of 2016, the company's accounts receivable turnover ratio reached 48.3, the highest level in the Company's history (22.2 in 2015, 16.5 in 2014, 12.9 in 2013). The current receivable turnover ratio is an evidence of the commercial department's high efficiency (also indirectly proven by high solvency of the consumers of BerozkaGaz Ob's products).
BerozkaGaz Ob JSC maintains a good level of financial viability. In the first half of 2016, the Company's equity plus long-term debt to total assets ratio (indicating its financial stability) was 0.81. It should be noted that the Company's financial stability ratio never fell below the (generally acceptable) lower threshold in the last five years.
In 2012-2015, the loan debt of BerozkaGaz Ob JSC grew steadily to reach almost RUB 8.2 billion at the start of 2016. However, in the first half of this year, the Company reduced its loan debt by 8.8% to almost RUB 7.4 billion. As a result, the debt ratio (net debt / EBITDA) decreased from 8.41 to 8.32. A stronger improvement was achieved in the loan debt to revenue ratio which decreased from 4.25 to 3.8 in the first six months of 2016. The total debt to assets ratio also improved from 1.47 to 1.29. The recent debt reduction trend contributes to the credit rating of BerozkaGaz Ob JSC.
BerozkaGaz Ob JSC has a healthy financial standing due to a comfortable debt profile (the related ratio being 0.13). The Company's obligations are mainly composed of long-term credits and loans. There are no short-term credits and loans in the Company's liabilities.
At the end of September 2016, the debt obligations of BerozkaGaz Ob JSC arose from two large loans maturing in 2024 and 2026 (accounting for approximately 52% of the total amount of debt), three bank loans with final maturity in 2019, 2021 and 2025 (42% of the total debt) and one bank loan with final maturity in April 2017 (ca. 6% of the total debt).
We also appreciate the Company's lower currency risks in the management of foreign currency denominated debt, primarily owing to debt structure improvements. The share of foreign currency in the total loan debt of BerozkaGaz Ob JSC decreased to approximately 40.3% at the start of July 2016 from approximately 46.8% at the end of 2015. In the 6-month period, the Company's foreign currency-denominated debt decreased by 23.4%. The lower share of the foreign currency-denominated debt obligations mitigates future loan debt management-related risks. Besides, the Company's has been exporting some of its products (stable natural gasoline) since 2016, which generates foreign currency-denominated revenues. The inflow of foreign currency also reduces BerozkaGaz Ob's risks in the management of foreign currency denominated debt.
We regard the loan debt servicing dynamics at BerozkaGaz Ob JSC as fairly good and encouraging. The Company effects loan payments without delays, with three loans even has repaid ahead of schedule.
The Company's rating is constrained by a heavy long-term debt, losses from current operations and a rather ratio of accounts receivable to accounts payable.
The loan debt of BerozkaGaz Ob JSC remains heavy, although it had somewhat decreased by the start of July 2016. The EBITDA to total loan debt ratio was 0.12, the EBITDA to bank loan debt ratio was 0.26.
The activity of BerozkaGaz Ob JSC according to Russian accounting standards remains unprofitable. Net loss from operations in the first half of 2016 exceeded RUB 13.1 million. It should be noted that the Company has been gradually reducing net losses since 2014; in the first half of 2016, its net loss was almost 2.5 times below what it was in January-June 2015. Nevertheless, the Company's accumulated uncovered loss has increased negative capitalization of BerozkaGaz Ob JSC, which is a negative factor for the Company's credit rating, even though we understand that the uncovered loss, to a large extent, arises from exchange rate differences due to revaluation of foreign currency-denominated loans.
Another risk factor is a fairly low ratio of accounts receivable to accounts payable decreasing to 0.04 by the second half of 2016. This largely results from the lower turnover of accounts payable and their increase 7.2-fold in the first half of 2016. For the 6-month period in 2016, the share of accounts payable in total liabilities of BerozkaGaz Ob JSC grew from 1.8% to 12.5%. The accounts payable growth was driven by a change in the traditional stable natural gasoline sales model to export sales involving an agent, as well as the imposition of an excise duty on stable natural gasoline in 2016. The growth of short-term liabilities constrains the Company's rating.
BerozkaGaz Ob JSC (previous name: ObGasProcessing / OGP CJSC) was founded in October 2008 to implement a pilot project of its parent company (MONOLIT LLC, later rebranded as BlueLine Project LLC, then as BerozkaGas Company) in Khanty-Mansi autonomous area - Yugra. The aim of the project was to build and commission an associated gas treatment (processing) unit at Rosneft Oil Company's Prirazlomnoye field. Total investment reached about 110 million US dollars including 48 million US dollars borrowed from Gazprombank. A gas reciprocating power plant was later built with the aim of further business development.
The APG processing unit at Prirazlomnoye has been in operation since 2011, the gas reciprocating power plant since 2015.
Full Company name: "BerozkaGaz Ob" Joint Stock Company
Short name: "BerozkaGaz Ob" JSC
Location: Tobolsky Trakt 4, Khanty-Mansiysk, Khanty-Mansi autonomous area - Yugra, Tyumen region, 628011 Russia
As of July 1, 2016, assets of BerozkaGaz Ob JSC exceeded RUB 5.7 billion, the authorized capital was RUB 1 million. The Company's reports are audited by MICROPOL-CONSULTING LTD.
This press release refers to the Statement of assignment of a credit rating to BerozkaGaz Ob JSC based on the Credit Rating Methodology for Corporates (Issuers) and Financial Assets rev. January 23, 2014, including the amendments approved by the Methodology Committee on February 18, 2015). A deviation was made from the rating methodology towards a higher rating compared with the result of the model calculation, seeing as the standard model calculation procedure disregards the special public status and international environmental significance of the activities of BerozkaGaz Company Group which includes BerozkaGaz Ob JSC. The operation as part of BerozkaGaz Company which proved to be a responsible and competent partner in implementing environmentally significant APG utilization projects is a major reputational resource raising the Company's national scale credit rating to A (3).
AK&M Rating Agency assigned a credit rating to BerozkaGaz Ob JSC for the first time on October 26, 2012. The last rating action in relation to the Company was taken on October 23, 2015. All rating action announcements are available on the akmrating.ru website.
The rating is valid until October 2017. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the Company's creditworthiness are revealed.
For estimation purposes, we completely rely on the reliability of information provided by the Company. The rationale for AK&M Rating Agency's judgment on the rating may include information acquired from other sources we deem to be reliable; however, the agency does not check the input data exhaustively and disclaims all responsibility for their possible errors.
The rating, along with any information and conclusions provided in this press release, only conveys our creditworthiness opinion and shall not be construed as a recommendation to make any investment decisions.
AK&M Rating Agency shall not be held liable for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.
AK&M Rating Agency is a leading independent national rating agency engaged in rating activities since 1993.
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