Korea National Oil Corp.

The stable outlook on KNOC reflects the outlook on Korea because we equalize the ratings on the company with that on the sovereign. The equalization reflects our expectation of an almost certain likelihood of the government providing KNOC with extraordinary support if the company faces financial distress. We would lower the ratings on KNOC if we downgrade Korea. A weakening of KNOC's role or link to the government could also lead to a downgrade of the company. We would raise the ratings on KNOC if we were to upgrade Korea. Given the geographical diversity of KNOC's production assets, we believe its revenue will mainly be a function of production volume and oil prices, rather than GDP growth for a particular

...The ratings on Korea National Oil Corp. (KNOC) are equalized with those on the South Korean government. We expect KNOC to continue benefiting from extraordinary government support in times of distress. We believe the company plays a critical role as the government's sole legally mandated oil policy arm. KNOC will likely maintain a monopoly in the stockpiling and management of Korea's strategic oil reserves. The government's full ownership of KNOC also enables ongoing financial support and tight supervision. As a major government-related entity, we believe KNOC will maintain strong access to credit markets and benefit from low funding costs. Falling oil prices will likely weaken KNOC's profitability and financial metrics over the next 12 months. We anticipate the company will post a significant decline in operating cash flows in 2020, mainly due to sizable operating losses in its exploration and production (E&P) business. Accordingly, KNOC's debt-to-EBITDA ratio is likely to significantly...

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