RUSSIA'S STABLE OUTLOOK
According to OGE, Russia's oil and gas companies will continue to benefit from the weak rouble while avoiding a major tax hike in 2017, according to a new special report by Fitch Ratings.
This will help the companies to balance cash inflows and outflows amid low oil prices, leading Fitch to revise the sector outlook to stable from negative.
"Based on Russia's preliminary budget, we expect that in 2017 the tax burden on the sector will remain broadly at the 2016 level. However, a major tax hike cannot be ruled out in future, especially if oil prices retreat below $40 per barrel again," said the report.
Oilfield services companies should also be in fairly good shape, said Fitch Ratings, adding that drilling volumes are set to remain stable or even rise, and day rates have remained stable in rouble terms.
However, Fitch Ratings analysts believe that downstream-focused companies, such as standalone refineries, will find themselves in a worse position.
"Refining margins may continue to fall due to an expected decrease in export duties, which may be partially offset by rising oil prices. Retail margins will also suffer, as the burden of higher excise duties is likely to be split between oil and gas producers and customers," said the report.
According to the estimations of Russia's Finance Ministry, the duties for oil export from the country will decrease from Dec.1 by $2.3 to $90.4 from $92.7 per ton.
"US/EU sanctions will continue to have a limited impact on credit profile of Russian oil and gas producers," said Fitch Ratings.
Russian and, occasionally Chinese, banks will provide necessary liquidity to sanctioned entities, while non-sanctioned companies, such as PJSC Gazprom (BBB-/Stable) and PJSC Lukoil (BBB-/Stable), will have more options, including the re-opened Eurobond market, said the report.
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IMF - Output grew by 3.8 percent in 2017, underpinned by a resilient non-hydrocarbon sector, with robust implementation of GCC-funded projects as well as strong activity in the financial, hospitality, and education sectors. The banking system remains stable with large capital buffers. Growth is projected to decelerate over the medium term.
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