The S&P rating service changed its outlook for company Novatek, the biggest privately-owned producer of natural gas in Russia. The new outlook rating assigned to Novatek by the agency is “stable”, up from the previous ranking of “negative”. S&P has kept its long-range issuer credit rating for the gas producer at “BBB-”. Meanwhile, the Russian national scale rating of the company currently stands at “ruAA+”.

The change in the outlook for the company indicates that S&P analysts are now of the opinion that Novatek’s asset purchases made in 2010 have been successfully absorbed and are now adequately offset by the company’s steady cash flow. Novatek’s acquisitions totaled USD 1.7 billion.  

The flow of cash in the company remains strong first and foremost as a result of sustained production expansion, increased sales of gas on the regulated market, as well as greater gas prices under export contracts.

At the same time, according to the ratings agency, the gas producer remains vulnerable to inherent country risks, which include but are not limited to uncertainties in the enforcement of the tax regime and other regulations. An additional risk is presented by the volatility of the currency exchange rate, according to S&P.

The company’s new outlook of “stable” evidences the determination of S&P that Novatek’s inflow of cash from operations will rise in consequence of expanded production and domestic sales of gas.

S&P further indicated that a ratings upside would not be likely in view of the significant exposure to the risks of the Russian market that Novatek already has.