OREANDA-NEWS. Fitch Ratings has affirmed PJSC Gazprom's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BBB-' with a Negative Outlook. A complete list of rating actions is available below.

The ratings reflect our expectations that Gazprom will remain a vital gas supplier to Europe. We expect competition in the European gas market to intensify in the near future, as new LNG production projects come on-line globally. However, Gazprom's low cost position should help the company maintain its market share, provided it responds to changing market conditions. Gazprom's new projects, mainly the Power of Siberia to supply gas to China, should enhance the company's business profile in the long term but they could stretch leverage and free cash flow (FCF) in the next two to three years.

Gazprom has significantly reduced its presence in the international debt markets amid Russia's geopolitical tensions with the west; however, the company's one-year liquidity is strong. In 2015-16 Gazprom issued two medium-term Eurobonds, in October 2015 (EUR1bn, three years) and March 2016 (CHF500m; 2.5 years) but its ability to borrow larger amounts in the international Eurobond markets remains untested. We assume that Gazprom will be able to maintain its liquidity by borrowing from Russian banks, as well as occasionally international and Chinese debt markets.

Gazprom is Russia's largest state-owned energy company, engaged in natural gas production, transportation and distribution, as well as crude production and refining, heat and electricity generation. In 2015, Gazprom produced 445 billion cubic metres (bcm) of natural gas, including its share of associates, and generated RUB1,874bn (USD31bn) EBITDA. Its end-2015 funds from operations (FFO) adjusted net leverage was 1.3x, one of the lowest among global oil and gas companies.

Gazprom's ratings and Outlook are constrained by those of the sovereign, in view of the influence Russia (BBB-/Negative) exerts on the company as a key shareholder and through taxation.