Through its interest in Petroleum Development Oman (PDO), EDO is the largest oil and gas producer in Oman
Oman : International ratings agency Fitch Ratings has affirmed Energy Development Oman SAOC’s (EDO) Long-Term Issuer Default Rating (IDR) at ‘BB’ with a Positive Outlook and assigned it a senior unsecured rating of ‘BB’/’RR4’.
EDO’s Long-Term IDR is constrained by the rating of its sole shareholder, the government of Oman (BB/Positive) given their close links, in line with Fitch’s Government-Related Entities (GRE) and Parent and Subsidiary Linkage (PSL) Rating Criteria, said Fitch in a press statement.
“We have revised EDO’s Standalone Credit Profile (SCP) to ‘bbb+’ from ‘bbb’, due to a growing record of maintaining a prudent financial profile and successfully maintaining the size and scale of reserves and production within the current fiscal framework. The SCP remains supported by EDO’s large-scale oil and gas operations, strong and resilient cash flow generation due to contracted sales prices for gas and a flexible royalty framework, flexible dividend policy, and low leverage,” it stated.
Through its interest in Petroleum Development Oman (PDO), EDO is the largest oil and gas producer in Oman. PDO operates the onshore Block 6 oil and gas concessions, which comprise over 24% of Oman’s land acreage and have more than 50 years of production history. This somewhat mitigates EDO’s focus on a single country of operations, said Fitch, adding that it expects an average output of around 760kboe/d until 2026.
EDO, says Fitch, has also been subject to a unique fiscal framework since 2021. The fiscal terms include royalties paid to the government weekly based on EDO’s monthly revenue from the sale of oil and condensate and taxes paid on income derived from its oil and gas operations.
“Royalties paid are significant under our price deck, but they are determined by prevailing oil prices in a non-linear fashion, supporting stable cash flows under a wide range of price scenarios,” it noted.
EDO’s tax burden is also significant, is said. “However, we view the overall fiscal framework as generally in line with global standards, where national oil and gas companies are subject to generous pay outs to the government, albeit with provisions to ease the burden on cash flows when market conditions are weak,” it explained.
Fitch forecasts EDO will maintain a strong financial profile until 2026 under the agency’s oil and gas price deck, despite growing capex and high royalties and tax payments to the government. Dividends are paid from excess cash flow after all debt service obligations and working capital requirements have been met, as well as considering minimum cash levels, which allows cash flow flexibility.