OREANDA-NEWS. Fitch Ratings has affirmed Tengizchevroil Finance Company SARL's (TCO Finance) series A senior secured notes at 'BBB+' with Stable Outlook.

The affirmation reflects continuing stable operating performance and strong financial performance of the operating oil company, Tengizchevroil LLP (TCO), in light of less than five months to the final debt maturity in November 2014. The last repayments on 15 November 2014 have already been pre-funded via a six-month debt service reserve account. The notes' rating is capped at Kazakhstan's sovereign Issuer Default Rating (BBB+/Stable/F2).

In 2013 TCO produced record 27.1m tonnes of oil, exceeding output in the previous year by 11.8%. The strong production performance was also observed in the first five months of 2014. TCO is fully exposed to oil price risk, but continues to benefit from the favourable price environment, with an average selling price of USD108/bbl in the first five months of 2014 - same as in 2013. TCO sells crude oil on a spot and short-term contract basis and as such there are no long-term off-take contracts. TCO continued to see strong financial performance, with 2013 debt service coverage ratio at 12.6x (2012:11.6x).

TCO uses a mix of transportation routes, which includes the Caspian Pipeline Consortium (CPC) and rail routes. In 2014 TCO increased the volumes transported by CPC due to the expansion of the pipeline and decreased rail shipments. Since 3Q13, TCO also resumed shipments via the BTC (Baku-Tbilisi-Ceyhan) pipeline. Transportation costs remained fairly stable in 2013 and so far in 2014. The ambitious expansion project (Future Growth Project) and the related Wellhead Pressure Management Project (WPMP) targeted to significantly increase production are progressing, but should not have a negative impact on the project's operations prior to the rated debt's maturity in November 2014.

TCO continues to pay the oil export duty (increased to USD80/tonne in April 2014 from USD60/tonne), but offsets the duties paid against royalty payments in accordance with the partnership agreement with the Kazakhstan government.

The rating is unlikely to change through to debt maturity in November 2014.