Moody’s upgrades SOCAR’s Rating to Investment Grade

The international credit rating agency Moody’s Investors Service has upgraded the long-term issuer rating of the State Oil Company of the Azerbaijan Republic (SOCAR) to Baa3, moving it from speculative grade to investment grade.

According to APA news agency, the previous ratings — including the corporate family rating at Ba1 and the probability of default rating at Ba1-PD — have been withdrawn. SOCAR’s Baseline Credit Assessment (BCA) was affirmed at Ba2. The outlook on the rating has been revised from “positive” to “stable.”

The mentioned rating upgrade is aligned with Azerbaijan’s sovereign rating being raised to the “Baa3” level (on July 4, 2025) and reflects SOCAR’s close financial ties with the state, its strategic importance in the country’s economy, and the improved macroeconomic environment.

Moody’s notes that despite a weak oil and gas market, SOCAR has improved its financial discipline and shareholder decision-making stability in recent years. According to Moody’s, the company’s adjusted operating profitability (excluding interest) was 9.1% in 2023 and 10.1% in 2024. This compares with 11.8% in 2022, 8.7% in 2021, and 6.2% in 2020. SOCAR has generated positive free cash flow (FCF) for four consecutive years.

In 2024, the company’s total debt increased 2.9 times, primarily due to the consolidation of the South Gas Corridor (SGC) CJSC. However, this ratio is forecasted to remain below 3 times in 2025–2026. The company’s liquidity position is considered satisfactory amid debt restructuring.

In 2024, SOCAR recorded respective declines in oil and gas production of 3.8% and 8.3%. The company views these decreases as short-term fluctuations and plans to ensure stable production going forward. To this end, SOCAR expanded its international upstream activities by acquiring a 3% stake in the Umm Lulu and Satah Al Razboot fields from ADNOC in the UAE in 2024, and a 10% stake in Israel’s Tamar gas field in 2025.

Moody’s states that SOCAR’s rating is also supported by the company’s key role in Azerbaijan’s oil and gas sector, its close ties to the government, relatively increased discipline in strategic and financial decisions, and its control over the South Gas Corridor.

At the same time, rating constraints include the company’s complex organizational structure, limited transparency, high volume of internal trade, concentrated operating geography, and some weak investments under SOCAR’s control — for example, Petkim Petrokimya Holding in Türkiye (rated Caa1 with a negative outlook).