Romania: Fitch assigns Romgaz ‘BBB-‘ Rating

Fitch Ratings has assigned Romanian Romgaz a first-time ‘BBB-‘ Long-term Issuer Default Rating (IDR) with a Stable Outlook.

Romgaz’s ‘BBB-‘ rating benefits from a one-notch uplift from its ‘bb+’ Standalone Credit Profile (SCP) for state support, as per our Government-Related Entities (GRE) Rating Criteria.

The SCP reflects Romgaz’s dominant position in Romania’s natural gas market, upstream production growth potential from the Neptun Deep and Caragele reservoir developments and conservative financial policy. Key rating constraints include its comparatively modest production scale, lack of geographic diversification due to its sole focus on Romania, the ageing nature of its legacy gas assets, large capex and manageable execution risk.

Fitch said that Romgaz has ambitious plans to develop Neptun Deep, a deepwater offshore project in the Romanian Black Sea. Romgaz acquired a 50% stake in the project from Exxon Mobil for EUR1 billion in 2022 and is a partner with OMV Petrom, Neptun Deep’s operator. The development plan includes infrastructure of 10 wells and an offshore platform, with production expected to start in 2027, reaching a gross plateau production of approximately 8 billion cubic metres (bcm) annually. Romgaz and OMV Petrom will invest up to EUR4 billion in the project.

Rating agency view Neptun Deep as a transformational project for Romgaz. It will allow Romgaz to increase natural gas production by half to around 150 thousand barrels of oil equivalent per day (kboe/d) from 83 kboe/d in 2023, halting a declining production trend from existing mature reservoirs. The project will also secure Romania’s energy independence and position the country as the EU’s largest natural gas producer from domestic resources.

Romgaz has historically operated with a net cash position, reflecting its prudent financial management. Fitch forecast EBITDA net leverage will rise through 2026 due to significant capex, particularly on Neptun Deep development. However, net leverage is expected to decline from 2027 as new projects contribute to EBITDA. Romgaz’s financial policy assumes EBITDA net leverage below 2.0x across economic cycles, supporting the company’s ‘bb+’ SCP.

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