BAKU — Moody’s Investors Service has upgraded the long-term issuer rating of Azerbaijan’s state oil company SOCAR to investment grade, assigning it a “Baa3” rating with a stable outlook.
The move follows the July 4 upgrade of Azerbaijan’s sovereign credit rating from “Ba1” to “Baa3”, marking the country’s first investment-grade status since 2014.
In its new rating statement, Moody’s cited SOCAR’s strong financial performance, strategic importance to the Azerbaijani government, and improved macroeconomic conditions as key drivers for the upgrade.
“This rating action reflects SOCAR’s solid credit links with the state, as well as its exposure to Azerbaijan’s operational and macroeconomic environment,” the agency said.
Moody’s affirmed SOCAR’s baseline credit assessment (BCA) at “Ba2”, and shifted the company’s outlook from positive to stable, indicating that further upgrades would require greater improvements in credit metrics, transparency, and decision-making predictability.
Strategic Role and Fiscal Discipline Highlighted
The agency underscored SOCAR’s critical role in Azerbaijan’s energy and fiscal policy, calling it a “strategically important entity” for the government. It also praised the company’s disciplined approach to investment spending, capital allocation, and shareholder decisions, particularly in a volatile global oil and gas market.
“SOCAR’s strong performance and prudent fiscal management continue to support its credit profile, even as the global energy landscape remains uncertain,” the statement said.
While oil and gas production declined by 3.8% and 8.3% respectively in 2024 — raising some short-term concerns — Moody’s said the company views this dip as temporary and expects stable hydrocarbon output in the medium and long term.
International Expansion Aims to Offset Domestic Decline
To support long-term production goals, SOCAR has accelerated its international expansion in upstream activities. In 2024, the company acquired a 3% stake in ADNOC’s offshore SARB, Umm Lulu, Bin Nasher, and Al Bateel fields in the UAE — its first overseas upstream investment. It also finalized the acquisition of a 10% stake in Israel’s Tamar offshore gas field, signaling a broader shift toward global diversification.
Stronger Sovereign Backing Enhances Credit Profile
According to Moody’s, Azerbaijan’s recent upgrade reflects stronger institutional effectiveness, improved macroeconomic stability despite oil price volatility, and continued reforms in the banking and regulatory sectors. Efforts to reduce the state budget’s reliance on hydrocarbon revenues and develop the transport and logistics sectors have further supported the country’s fiscal resilience.
“The improved sovereign outlook enhances the government’s capacity to support SOCAR if needed, strengthening the company’s credit standing,” Moody’s noted.
