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Sub-sector: Oil and Gas
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Fundamental View
AS OF 11 Mar 2026We expect the credit profile of Sinopec, which is one of the three Chinese national oil companies (NOCs) to continue to be underpinned by its strategic role in China’s energy security and the resulting strong government support.
That said, credit metrics could weaken in FY26 depending on the trajectory and duration of the Middle East conflict and the resulting impact on crude oil and gas feedstock costs, which may compress downstream and chemical margins.
For clarity, our analysis is based on the financials of HKEX‑listed China Petroleum & Chemical Corporation (Sinopec Corp; 386.HK), which we use as a proxy for the credit profile of its parent, China Petrochemical Corporation, the obligor of the Group’s outstanding $ bonds (ticker: SINOPE).
Business Description
AS OF 11 Mar 2026- Sinopec Group is a Chinese integrated oil and gas (O&G) company and one of the largest globally and domestically, with businesses spanning exploration & production (E&P), refining, chemicals, and marketing & distribution.
- In 9M25, Sinopec Corp’s external operating revenues were mainly from marketing and distribution, which accounted for ~52.2% of total sales revenue and chemicals (~14.1%), while refining and E&P accounted for ~5.8% and ~5.6%, respectively. The corporate and others segment made up the remaining ~20.5%, including import and export trading, R&D, and centralized management activities.
- The refining segment purchases crude oil from both third parties and the Company’s E&P operations, processing it into refined petroleum products. Most gasoline, diesel, and kerosene are transferred internally to the marketing and distribution segment, while part of the chemical feedstock is supplied to the chemicals segment. The marketing and distribution segment procures refined products from internal and external suppliers and distributes to domestic customers through Sinopec’s nationwide wholesale and retail network.
- In 9M25, Sinopec’s total oil and gas production reached 394 mmboe, representing a 2.2% YoY increase, including 211 mn barrels of crude oil and 1,099 bn cubic feet of natural gas (+4.9% YoY). The average realized price for crude oil declined to $66.4/bbl (‑13.3% YoY), while the realized price for self‑produced natural gas eased to $7.14/thousand cubic feet (‑4.5% YoY).
Risk & Catalysts
AS OF 11 Mar 2026Risks: Weaker-than-expected domestic demand, higher-than-expected crude oil and feedstock costs, particularly in a prolonged US-Iran conflict or broader Mideast escalation, elevated inventory losses, capex overruns or sustained high investment intensity, geopolitical and sanction-related headline risks.
Catalysts: inflow into China $ bonds, stronger-than-expected recovery in chemical product demand, sustained easing in feedstock or crude oil costs, policy-driven support for SOEs.
Key Metric
AS OF 11 Mar 2026| RMB bn | FY21 | FY22 | FY23 | FY24 | LTM 3Q25 |
|---|---|---|---|---|---|
| Total Debt/Capitalization | 25.6% | 27.5% | 31.5% | 33.0% | 35.4% |
| Net Debt/Capitalization | 7.6% | 16.3% | 19.8% | 23.0% | 23.8% |
| Total Debt/Total Equity | 34.5% | 38.0% | 46.1% | 49.3% | 54.8% |
| Total Debt/Total Assets | 16.7% | 18.3% | 21.7% | 23.0% | 24.8% |
| Total Debt/EBITDA | 1.2x | 1.5x | 2.0x | 2.3x | 2.8x |
| Net Debt/EBITDA | 0.4x | 0.9x | 1.3x | 1.6x | 1.9x |
| EBITDA/Gross Interest | 20.1x | 16.1x | 14.5x | 13.0x | 11.6x |
| EBITDA Margin | 9.4% | 7.0% | 6.8% | 6.9% | 6.9% |
CreditSight View Comment
AS OF 11 Mar 2026We affirm our Market perform recommendation on Sinopec. A-rated Chinese state-owned enterprises (SOEs), including Sinopec are trading tight due to a lack of new supply and as investors fly to quality amid macro uncertainties in China. We continue to prefer AA-rated Korean quasi-sovereign names for safe carry (like KOROIL, KORGAS, KEPCO) and higher-beta Chinese SOEs for spread pickup.
Recommendation Reviewed: March 11, 2026
Recommendation Changed: May 03, 2021
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Fundamental View
AS OF 23 Feb 2026KORGAS is Korea’s sole integrated gas utility and a quasi‑sovereign credit, with an effective monopoly across natural gas E&P, procurement, storage, transmission, and wholesale distribution.
Its credit profile is underpinned by a dominant position in the gas and hydrogen value chain and strong government support, which partly mitigates the impact of delayed and incomplete cost pass‑through during periods of price volatility, such as in FY22.
We expect earnings to stabilize and modestly improve in FY26-FY27, driven mainly by margin normalization, lower financing costs from debt reduction and easing receivables, while volume growth remains constrained by structural competition from nuclear and renewables.
Business Description
AS OF 23 Feb 2026- KORGAS is 54.6% owned directly/indirectly by the Korean government (Central Government 26.2%, KEPCO 20.5%, Local Government 7.9%). It is Korea's only fully integrated gas utility, holding an effective monopoly over E&P, procurement, storage, transmission, and wholesale distribution of natural gas. KORGAS plays a key role in Korea’s energy transition, with plans to increase LNG generation capacity by 56% by 2036 from 2022. KORGAS was also designated as Korea’s sole hydrogen distribution agency in 2020.
- The Korean natural gas sector is split into wholesale and retail segments. KORGAS is the exclusive wholesaler, while city gas companies manage retail supply via regional networks. In 9M25, 46% of KORGAS's gas sales were to domestic LNG-fired power generation companies (gencos, including KEPCO subsidiaries and IPPs), with the remaining 54% sold to city gas and heating companies.
- KORGAS operates under a highly regulated framework, with government oversight of tariffs, investment plans, and capacity expansion. In addition to its domestic LNG infrastructure, the company owns overseas E&P assets to enhance supply security and earnings diversification. In line with government policy, KORGAS continues to invest selectively in hydrogen infrastructure and low‑carbon initiatives, leveraging its gas network and operational expertise to support Korea’s clean‑energy transition.
Risk & Catalysts
AS OF 23 Feb 2026Risks: (1) delayed or insufficient tariff adjustments; (2) higher-than-expected debt-funded capex; (3) regulatory and policy risks; (4) overseas E&P volatility; (5) foreign-exchange risk; (6) liquidity and refinancing risk; (7) asset impairment risks; (8) structural demand risk.
Catalysts: (1) stronger-than-expected government support; (2) more timely and adequate tariff adjustments; (3) stabilizing fuel prices; (4) sustained debt reduction and receivables recovery; (5) resilient regulated city-gas earnings; (6) selective growth in hydrogen and low-carbon energy initiatives.
Key Metric
AS OF 23 Feb 2026| KRW bn | FY21 | FY22 | FY23 | FY24 | LTM 3Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 75.8% | 81.3% | 80.7% | 79.0% | 76.7% |
| Net Debt to Book Cap | 74.2% | 79.8% | 79.1% | 77.2% | 74.5% |
| Debt/Equity | 313.3% | 434.4% | 418.0% | 377.0% | 329.5% |
| FFO to Total Debt | 7.9% | 7.3% | 4.2% | 8.3% | 8.8% |
| FFO to Net Debt | 8.1% | 7.5% | 4.3% | 8.5% | 9.1% |
| Interest Coverage | 4.8x | 5.1x | 2.2x | 3.4x | 2.1x |
| EBITDA Margin | 11.4% | 8.8% | 8.0% | 13.3% | 13.0% |
CreditSight View Comment
AS OF 23 Feb 2026We maintain our O/P recommendation on KORGAS. Its credit profile is supported by its essential policy role as South Korea’s sole vertically integrated natural gas utility and a key energy supplier. We expect earnings to stabilize and modestly improve in FY26-FY27, driven mainly by margin normalization, lower financing costs from debt reduction and easing receivables, while volume growth remains constrained by structural competition from nuclear and renewables. We find KORGAS attractive relative to lower-rated Chinese SOEs, BBB-rated low beta Korean corporates, and other Korean quasi-sovereigns. We recommend KORGAS to investors seeking safe carry in the Asia credit space.
Recommendation Reviewed: February 23, 2026
Recommendation Changed: June 27, 2023
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Fundamental View
AS OF 09 Dec 2025Petron’s delivered a robust set of result in 9M25; we expect Petron’s credit metrics to improve YoY, driven by improvement in its EBITDA and lower debt. We expect FY25 EBITDA to improve YoY owing to double-digit YoY-decline in crude oil input costs in FY25, though partially offset by a single-digit YoY decline in sales volume.
About two-third of its total revenues are derived from the Philippines and are indexed to Dubai crude prices, which allows for smooth cost pass-throughs and good insulation from crude price volatility.
Free cash flows are typically negative due to inventory fluctuations that outweigh low capex.
Business Description
AS OF 09 Dec 2025- Petron is the largest oil refining and retailing company in the Philippines, and the third largest player in Malaysia. It maintains a 24% market share in the Philippines (followed by Shell and Caltex) and a 20% market share in Malaysia (largest being Petronas), based on total fuel sales volumes.
- Petron has a total refining capacity of 268k barrels/day (bpd) and accounts for about 30% of the Philippines' fuel needs. Its petroleum refining facilities include the Limay Refinery in Bataan, Philippines (capacity of 180k bpd; 67% of total) and the Port Dickson Refinery in Negeri Sembilan, Malaysia (capacity of 88k bpd; remaining 33% of total).
- Petron's refineries process crude oil into a full range of petroleum products including gasoline, diesel, LPG, jet fuel, kerosene and petrochemicals.
- It further markets and retails these fuel products through its fuel service stations located across the Philippines (~1,800 outlets) and Malaysia (>800 outlets).
- Petron sources its crude oil supplies from third-party suppliers, namely Saudi Aramco, Kuwait Petroleum Corporation and Exxon Mobil, which are bought on the basis of term contracts and in the spot market.
- Petron mainly supplies its petroleum and fuel products to customers in Malaysia and the Philippines (~95% of annual revenue).
- Petron is 68% owned by San Miguel Corporation (SMC), one of the largest and most diversified conglomerates in the Philippines based on total revenues and assets. SMC's CEO, Mr. Ramon Ang, is also Petron's CEO.
Risk & Catalysts
AS OF 09 Dec 2025Petron cannot fully pass on higher crude oil input costs to customers in Malaysia.
Petron operates in low-margin business (EBITDA margins ~5%) and maintains elevated credit metrics.
Petron is highly dependent on its Limay petroleum refining complex that makes up two-thirds of its total refining capacity (67%). Any events that disrupt the refinery’s operations could adversely affect Petron’s total revenues.
Key Metric
AS OF 09 Dec 2025| PHP bn | FY22 | FY23 | FY24 | 3Q24 | 3Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 74.0% | 75.1% | 74.5% | 70.8% | 71.0% |
| Net Debt to Book Cap | 65.5% | 68.2% | 67.1% | 59.7% | 60.7% |
| Debt/Total Equity | 284.2% | 301.4% | 292.0% | 242.0% | 245.0% |
| Debt/Total Assets | 70.2% | 67.6% | 64.9% | 63.6% | 61.9% |
| Gross Leverage | 10.9x | 7.1x | 7.4x | 7.9x | 6.0x |
| Net Leverage | 9.7x | 6.4x | 6.7x | 6.7x | 5.1x |
| Interest Coverage | 2.2x | 2.2x | 1.9x | 1.8x | 2.4x |
| EBITDA Margin | 3.4% | 5.3% | 4.7% | 3.8% | 7.1% |
CreditSight View Comment
AS OF 10 Mar 2026We maintain our Outperform recommendation on Petron (nomenclature changed from prefer c.2028 perp to O/P as its other c.2026 perp is called). We continue to like Petron’s c.2028 for its relatively high coupon and high carry. Overall, we think Petron is a stable credit with an improving credit outlook. We like its full cost passthroughs for its operations in retail O&G in the Philippines, low capex, consistently improving net leverage metric (LTM 1H25: 6x), manageable debt maturity profile, proven willingness/ability to call back its perps by their first call date, strong parental support from the domestically well-reputed San Miguel Group and a 3-year tenor to first call that limits duration risk.
Recommendation Reviewed: March 10, 2026
Recommendation Changed: March 10, 2026
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Fundamental View
AS OF 03 Sep 2025Petronas’ 1H25 and FY24 credit metrics remained resilient even as EBITDA fell as we had expected.
Despite the lower YoY outlook for O&G price realizations in FY25, we expect Petronas’ credit profile to remain resilient in FY25 and maintain its net cash position, aided by resilient domestic demand and still-positive FCFs.
We take comfort in Petronas’ strong support from the Government of Malaysia, given it is strategically vested with Malaysia’s entire oil & gas resources and provides a substantial source of government income.
Sizable O&G and renewable capex and high dividend payouts could restrain improvements in Petronas’ credit metrics and free cash flows.
Business Description
AS OF 03 Sep 2025- Petronas is an integrated oil and gas company, wholly owned and controlled by the Government of Malaysia.
- Its activities span the entire up/mid/downstream value chain both domestically and internationally. Key products and services provided include the sale and marketing of petroleum products, crude oil and condensates, LNG, natural and processed gas, petrochemicals, shipping services, property development and automotive engineering.
- Petronas carries out its exploration, development and production activities via production sharing contracts (“PSCs”), mostly with international O&G companies and Petronas' wholly-owned subsidiaries.
- Its Downstream segment is aimed at refining, supplying, trading, manufacturing and marketing of crude oil, petroleum products, and petrochemical products. Its key projects and factories include Pengerang Integrated Complex (PIC), Sabah Ammonia Urea in Sabah, and Integrated Aroma Ingredients Complex in Gebeng, Kuantan.
- Its Gas and New Energy division was set up in FY19 and groups all of Petronas' LNG, gas and renewable revenues into a single segment. Activities within this division include production of LNG, processing and transportation of gas and solar power production.
- Its 6 listed subsidiaries include MISC Berhad (57.56%), KLCC Property (75.46%), Petronas Chemicals Group Berhad (64.35%), Petronas Gas Berhad (51%), Petronas Dagangan Berhad (63.94%), and Bintulu Port Holdings Berhad (28.52%).
Risk & Catalysts
AS OF 03 Sep 2025Broad growth slowdown concerns could hamper sales of Petronas’ Downstream (petroleum products) and Gas & New Energy (LNG and natural gas) segments.
Prolonged periods of low crude oil prices could harm upstream O&G EBITDA (which typically contributes 50%-70% of total profit after tax), albeit mitigated partly by stronger downstream O&G EBITDA.
Sizable capex on domestic O&G and renewable energy ventures could restrain improvements in Petronas’ credit metrics and free cash flows.
Petronas is regularly required to pay dividends to the Government of Malaysia, which may weigh on its cash flows.
We remain watchful of how the dispute between Petronas and Sarawak state government unfolds, its impact on Petronas’ financials and its market position in the Malaysian O&G sector.
Key Metric
AS OF 03 Sep 2025| MYR mn | FY22 | FY23 | FY24 | 1H24 | 1H25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 18.4% | 18.2% | 18.0% | 18.6% | 20.0% |
| Net Debt to Book Cap | n/m | n/m | n/m | n/m | n/m |
| Debt/Total Equity | 22.6% | 22.2% | 21.9% | 22.8% | 25.1% |
| Debt/Total Assets | 14.7% | 14.4% | 14.5% | 14.3% | 15.8% |
| Gross Leverage | 0.6x | 0.8x | 0.9x | 0.8x | 2.1x |
| Net Leverage | n/m | n/m | n/m | n/m | n/m |
| Interest Coverage | 33.9x | 24.9x | 21.8x | 24.4x | 18.6x |
| EBITDA Margin | 50.7% | 44.8% | 42.0% | 43.6% | 45.3% |
CreditSight View Comment
AS OF 08 Dec 2025We maintain our M/P rec on Petronas and remove our preference for its 2026-2032 as our anticipated tightening has played out; Petronas’ short-dated have tightened ~30 bp since we first put out our preference. We compare Petronas to Pertamina and think its $ bonds now trade within our fair value range against Pertamina’s. We like Petronas’s larger EBITDA, net cash position, more regular financial reporting than Pertamina and Malaysia’s relative policy stability. With the Petronas vs Sarawak state dispute nearing a resolution, we are more comfortable with the credit though we remain watchful of any negative development should Sarawak further contest the reported agreement.
Recommendation Reviewed: December 08, 2025
Recommendation Changed: September 07, 2020
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Search topics about wealth insights and investments.Pertamina
- Sector: Energy
- Sub Sector: Oil and Gas
- Region: Indonesia
- Bond: PERTIJ 3.1 30
- Indicative Yield-to-Maturity (YTM): 5.339%
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Fundamental View
AS OF 18 Jun 2025- Pertamina enjoys very strong linkages with the Government of Indonesia (GoI) and is assured of extraordinary support in times of distress.
- Lower expected Brent crude prices YoY could weigh on its upstream margins and overall EBITDA (given the upstream business accounts for >65% of consolidated EBITDA).
- Although leverage typically remains low, Pertamina incurs large capex spending that could pressure its free cash flow generation.
- High persisting dividend outflows could restrain free cash flow improvements.
Business Description
AS OF 18 Jun 2025- Pertamina is involved in a broad range of upstream and downstream oil, gas, geothermal and petrochemical operations.
- In the upstream sector, it engages in the exploration, development and production and supply of crude oil, natural gas and geothermal energy.
- As for the downstream sector, the company carries out refining, marketing and distribution of oil, gas, fuel products and petrochemical and other non-fuel products.
- As of 31 December 2024, its total proved oil reserves stood at ~1,394 mmbbl (mn barrels of oil) and gas reserves stood at ~1,058 mmboe (mn barrels of oil equivalent). Its average daily oil and gas production was ~1,045,000 boe per day in FY24. The company owns and operates 6 refineries in Indonesia.
- Under the Public Service Obligation (PSO) mandate, Pertamina is responsible for providing certain grades of motor gasoline, automotive diesel oil, kerosene and LPG at subsidized prices. The subsidized retail price is often times lower than the cost of production, creating a shortfall, for which it receives reimbursements from the GoI.
Risk & Catalysts
AS OF 18 Jun 2025- Pertamina’s profitability is materially affected by volatility in oil & gas prices. Prolonged periods of low oil prices could hurt upstream earnings that form the bulk of overall EBITDA (>65%).
- As retail prices of certain fuel products are regulated, realized prices may be below its cost of sales.
- Pertamina has to initially absorb the shortfall between the regulated retail price and the cost of producing and distributing certain fuel products. If the price of crude oil exceeds the price ceiling set by the GoI, the company may receive insufficient subsidy reimbursements.
- Capex typically remains elevated and which pressurizes its free cash flow generation.
Key Metric
AS OF 18 Jun 2025| $ mn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 38.5% | 41.2% | 42.1% | 37.6% | 34.9% |
| Net Debt to Book Cap | 18.9% | 21.9% | 12.5% | 8.5% | 12.3% |
| Debt/Total Equity | 62.5% | 70.0% | 72.7% | 60.4% | 53.6% |
| Debt/Total Assets | 28.3% | 29.9% | 30.8% | 27.4% | 26.3% |
| Gross Leverage | 2.4x | 2.5x | 1.9x | 1.9x | 2.2x |
| Net Leverage | 1.2x | 1.3x | 0.6x | 0.4x | 0.8x |
| Interest Coverage | 7.8x | 8.7x | 11.2x | 8.9x | 7.5x |
| EBITDA Margin | 19.9% | 16.0% | 16.7% | 17.7% | 14.3% |
CreditSight View Comment
AS OF 05 Mar 2026We maintain our Market perform recommendation on Pertamina at the issuer level with a continued preference for its 2041 and 2042 bonds, and remove our pref for its 2031 as we now think it trades close to our FV. We think that these select bonds are oversold beyond even what a BBB- rating would suggest. While we acknowledge the downside risk of the O&G sector’s cyclicality and persisting policy uncertainty from Indonesia’s new sovereign wealth fund Danantara, we remain comfortable with Pertamina’s full state-ownership, timely fuel subsidy and compensation from the Indonesian government, positive free cash flow generation, robust credit metrics and our expectation for Pertamina’s strategic policy role to sustain even amidst macro headwinds and Danantara.
Recommendation Reviewed: March 05, 2026
Recommendation Changed: May 16, 2023
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