Fitch on Tuesday downgraded Saudi Aramco’s Long-Term Issuer Default Rating (IDR) to “A” from “A+,” the agency’s upper medium investment grade.
The outlook for this rating is “stable.”
The Aramco downgrade comes after Fitch lowered Saudi Arabia’s long-term foreign-currency issuer default rating to “A” from “A+” last month, citing rising geopolitical concerns regarding the Kingdom’s balance sheet and infrastructure challenges in the wake of the September 14 drone and missile attacks on Saudi Arabian oil installations.
Fitch forecast “very limited” impact on Saudi Aramco’s financial performance from the impact, and added that it downgraded the oil giant’s IDR given that the rating is capped by that of the sovereign “to reflect interdependency between the two and the influence the state exerts on the company through strategic direction, dividends and taxation.”
Saudi Arabia’s oil output had been halved following attacks on Saudi Aramco’s key oil-processing facilities in Abqaiq and Khurais. The Kingdom managed to quickly revive oil supplies to its customers by tapping into its strategic reserves, and later restored its production to about 11.3 million barrels per day (bpd), which was earlier than anticipated.
Saudi Aramco's upstream operations are focused on a single country and its production infrastructure is somewhat concentrated, Fitch noted in a statement.
However, this is mitigated by available spare production capacity which can be utilized in case of “production disruptions similar to recent events,” the agency added.
Saudi Arabian sovereign dollar bonds fell after the Fitch downgrade.
The 2047 issue lost 0.7 cent to 113.34 cents in the dollar, its biggest daily drop in a week. Aramco
bonds also slipped, with the 2049 issue shedding 0.4 cent to 109.51 cents in the dollar, Reuters reported, citing Tradeweb.