Moody’s affirms Petronas’ A2 ratings as Middle East war boosts earnings

Rating agency cites Petronas’s solid business profile, prudent financial policy, and maintaining excellent liquidity through oil price cycles.

Petronas’s A2 issuer and senior unsecured ratings, and its a2 baseline credit assessment were affirmed by the global rating agency yesterday.

Moody’s said Petronas’s rating remains one notch above Malaysia’s sovereign foreign-currency issuer rating of A3, reflecting its strong standalone credit profile, sizeable export and international revenue contribution, and access to global capital markets.

It said Petronas’s higher-than-sovereign rating also incorporates the government’s long track record of allowing it to operate independently, despite the government’s 100% ownership.

“The affirmation of Petronas’s A2 ratings reflects its solid business profile and prudent financial policy, which have enabled the company to maintain a net cash position and excellent liquidity through the oil price cycle,” Moody’s vice-president and senior analyst, Sim Hui Ting, said in a statement.

It estimates the group’s earnings before interest, taxes, depreciation and amortisation (Ebitda) will increase to between RM120 billion and RM130 billion in 2026, from RM112 billion in 2025. This is based on Brent crude averaging close to US$80 per barrel this year versus around US$70 last year.

As at Dec 31, 2025, Petronas’s cash holdings and short-term investments exceeded its total debt by RM90.4 billion, which Moody’s described as “excellent liquidity”.

The rating agency said higher energy prices in 2026 will support earnings growth at Petronas’ upstream business, which has been the largest contributor to group profits.

It said higher crude procurement and logistics costs arising from the Middle East conflict will weigh on downstream earnings. However, it expects overall group earnings to rise as upstream gains will likely offset downstream pressures.

It noted about half of the crude requirements for Malaysia’s refineries are imported, with nearly 40% transiting the Strait of Hormuz, the global energy chokepoint that has been blocked because of the US-Israel war against Iran.

Regulatory risks

Moody’s also highlighted regulatory risks in Malaysia’s O&G sector, including uncertainty surrounding Sarawak’s push for state-owned Petroleum Sarawak Bhd (Petros) to take over gas distribution activities in the state.

“The matter is now undergoing judiciary process to seek legal clarity. As the outcome and timeline remain uncertain, we have not incorporated any potential impact into our forecasts,” it said.

Moody’s also said any government action that materially reduces Petronas’ earnings or cash flow would be “credit negative”.

It said the group could face downward pressure if Malaysia introduces unexpected policy changes in the O&G sector that significantly reduce its reserves or production entitlements, or if Petronas undertakes a large debt-funded acquisition that weakens its credit metrics.

It said any downgrade of Malaysia’s sovereign rating would also result in a downgrade of Petronas’ ratings.