Moody’s affirms Baa1 rating to state-owned ONGC over better oil prices

Moody’s Investors Service Tuesday affirmed state-owned oil and natural gas corporation (ONGC’s) Baa1 local and foreign currency issuer ratings, saying it reflects an improvement in the firm’s credit metrics because of rise in oil prices.

ONGC consolidated credit metrics – as measured by retained cash flow (RCF) to net debt – improved to 51 per cent in FY 2019. “The improvement was largely driven by better earnings, which in turn was because of higher realized crude oil prices,” Moody’s said in a statement.

This should result in ONGC generating positive free cash flow – despite the company’s high level of capital spending and shareholder returns – which Moody’s expects the company will use to reduce its borrowings. Its credit metrics will likely remain appropriate for its rating category over the next 12-18 months.