Moody's: Higher oil, gas prices to support SGC's results in 2026

Southern Gas Corridor CJSC (SGC) is expected to preserve sound earnings and profitability, driven by the growing contribution from the midstream segment, while the current spike in oil and gas prices will further boost upstream performance in 2026.

Report informs that Moody's Ratings made the forecast.

"Longer-term volume risk related to gradual natural production decline at Shah Deniz is partly mitigated by the ongoing investment programme, which will support output from 2029, whereas potential additional gas supplies from the country's other gas fields should also help maintain future pipeline utilisation," Moody's said.

According to the agency, SGC's strong profitability and earnings visibility are primarily driven by its stable, high-margin midstream operations, which accounted for around 65% of the company's EBITDA in 2025, before intragroup elimination of transportation costs, as per Moody's assessment.

"Long-term gas transportation agreements include ship-or-pay provisions, tariff indexation and cost recovery mechanisms, supporting the company's results across commodity cycles. Long-term gas sales agreements governing deliveries from the Shah Deniz field also include take-or-pay clauses that mitigate demand risk. Despite these contractual protections, SGC remains exposed to commodity price risks through its upstream segment, alongside risks stemming from concentration on a single, albeit large, producing field that has reached plateau production," Moody's said.

Moody's noted that, along with sound operating performance, SGC's financial profile is underpinned by moderate investment requirements.

"Strong free cash flow generation and significant debt reduction have led to a marked improvement in credit metrics, with Moody's adjusted debt/EBITDA declining to 1.3x in 2024–2025 from 2.4x in 2023 and likely falling below 1.0x in 2026–2027, after the bullet repayment of $2 billion Eurobonds in March 2026," the agency said.

Moody's said SGC plans to commence dividend distributions in due course, subject to finalization of its dividend policy. While distributions could absorb a large share of annual cash generation, the agency expects the company to preserve its sound financial profile and strong credit metrics.

"The company has meaningful headroom under current leverage metrics and a substantial cash buffer, including short-term, interest-bearing investments. Modest debt service requirements further support SGC's strong liquidity," Moody's said.