Azerbaijan’s rating confirmed at BB+
Following the late February 2016 downgrade, Fitch Ratings confirmed Azerbaijan’s rating at BB+ with a negative outlook on August 26, 2016. The rating agency revised its 2016 forecasts for budget deficit from 12.5% of GDP to 7.3% of GDP as oil prices in 1H16 were relatively higher than expected previously and due to government’s conservative capital expenditures. Additionally, Fitch Ratings states that Azerbaijan has ample FX reserves to finance the deficit.
Weakness in the banking sector continues, however, according to the agency, potential recapitalization requirements would not be onerous for the sovereign.
BP-led consortium increased oil production in 2Q16
The BP-led consortium in Azerbaijan increased oil production by 4.8% y/y to 8.7mn tons in 2Q16, according to British Petroleum. A 36.9% y/y increase in West Azeri field production and a 12.6% y/y increase in West Chirag field production were the main drivers of output growth, along with increased condensate production from the Shah-Deniz field.
A 3.8% y/y increase in gas production from the Shah-Deniz field was not enough to compensate a 31.6% y/y decline in associated gas production from Azer-Chirag-Gunashli fields, resulting in a 5.2% y/y decrease in overall gas output by the BP-led consortium in 2Q16.
Capital and operating expenditures at major oil and gas fields down in 2Q16
Capital and operating expenditures by the BP-led consortium were down in 2Q16. Capex was down 16.8% y/y to US$ 1.7bn (+5.1% q/q), driven by a 20.2% y/y fall in Shah-Deniz-related capex and a 9.8% y/y fall in Azeri-Chirag-Gunashli-related capital spending.
A 38.2% y/y fall in operating expenses at Azeri-Chirag-Gunashli was the main driver of a 26.6% y/y decrease in total opex to US$ 271.0mn.
