KUALA LUMPUR (March 24): Moody’s Ratings has assigned an A2 rating to Petronas Capital Ltd’s proposed US dollar-denominated senior unsecured notes under its medium-term note (MTN) programme, which is guaranteed by national oil company Petroliam Nasional Bhd (Petronas).

Petronas Capital is a wholly owned special-purpose finance subsidiary of Petronas, established to issue debt securities and other obligations to finance the company’s operations.

In a statement on Monday, Moody’s said the rating reflects Petronas’ strong credit profile, supported by its large hydrocarbon reserves, solid financial metrics, prudent financial management, and excellent liquidity.

This is despite Moody’s expectation that Petronas’ earnings before interest, taxes, depreciation, and amortisation (Ebitda) will moderate to RM100 billion-RM110 billion per year in 2025-2026, down from around RM126 billion in 2024 due to lower oil prices.

“We also assume Petronas’ capital spending will be RM50 [billion]-RM60 billion in 2025, and the company will pay RM32 billion in dividends this year, as per Malaysia’s latest budget,” it stated.

However, the agency highlighted risks, including Petronas’ reliance on Malaysia-based reserves and its relatively smaller downstream business.

The rating agency also did not rule out the possibility of higher dividend demands from the government, and flagged uncertainties surrounding Petronas’ gas operations in Sarawak.

“Government moves that dent the company’s earnings or cash flows will be credit negative,” it warned.

Moody’s said the state-owned oil company remains one notch above Malaysia’s A3 sovereign rating, citing its strong credit profile, significant export revenue, and access to global capital markets.

However, Petronas’ rating is capped at one notch above the sovereign due to potential government influence over its operations, the agency added.

This assessment is based on close credit links between Petronas and the Malaysian government, which could lead to government interference that negatively impacts the company’s business profile or cash flow.

“We assess that Petronas has a very high likelihood of extraordinary support from and default dependence on the Malaysian government. However, this does not result in any rating uplift, as the sovereign rating is already positioned below the company’s rating,” Moody’s said.