OREANDA-NEWS. Standard & Poor's Ratings Services said today that it had affirmed its long-term corporate credit rating on Kazakhstan-government-controlled vertically integrated oil company KazMunayGas NC JSC (KMG) and its core subsidiary KazMunaiGas Exploration Production JSC at 'BB+'. The outlook remains negative.

We also affirmed our 'kzAA-' Kazakhstan national scale rating on KMG.

We revised our assessment on KMG's financial risk profile to "aggressive" from "highly leveraged" because we anticipate leverage will improve following the sale of KMG's 50% stake in Kashagan. We currently project Standard & Poor's- adjusted debt to EBITDA will average 2.5x-3.0x in the next 12-24 months and free operating cash flow will remain negative. However, we believe that this improvement might be temporary, as we believe the company could buy back its stake in Kashagan once oil prices improve and the company can raise sufficient debt without breaching its covenants. This leads us to apply a two-notch negative financial policy modifier, which brings the overall stand-alone credit profile (SACP) down to 'b'. We also continue to incorporate a four-notch uplift in our ratings on KMG, based on our expectation of a very high likelihood of extraordinary government support.

KMG is a 100% government-owned national oil company with stakes in essentially all of Kazakhstan's oil-related assets and priority access to new assets, which also benefit from vertical integration into pipelines. KMG holds stakes in all significant oil operations in Kazakhstan. It is one of the country's largest exporters and taxpayers and has some social mandates, such as supplying the local market with fuel at fairly low prices and investing in socially important projects. That said, KMG is responsible for only about 28% of the country's oil production (12% if only majority-owned operations are included).