Moody's Investors Service has maintained a low rating of Ba1 for China Oil and Gas Group Limited (COG) with a stable outlook, after the company announced it had completed an acquisition of oil and gas fields in Canada.

The acquisition will have no immediate impact on the Hong Kong-listed company's ratings, Moody's said in its report over the weekend after COG announced that it completed its acquisition of Baccalieu Energy Inc for a consideration of C$235 million ($250 million).

COG funded the consideration through internal resources.

Moody's expected COG's retained cash flow-to-debt ratio to improve to between 20 and 30 percent, and its debt to capitalization ratio to stay at 40 percent to 45 percent.

Ivy Poon, a Moody's analyst, said COG's foray into oil and gas field operation in Canada will introduce higher business risks to the Chinese natural gas supplier due to inherent uncertainties in development and production.

Business risks, such as Baccalieu's small operating scale and limited geographical diversity, the volatility of commodity prices, as well as integration risks will push COG to the lower end of its Ba1 rating category.

"However, COG's higher risk profile is somewhat counterbalanced by the moderate improvement in its projected metrics over the next three years, as its newly acquired assets exhibit healthy cash flows, underpinned by increasing production levels and manageable leverage," Poon said.

COG's operations include piped city gas as well as transportation and distribution of compressed natural gas and liquefied natural gas in China.

Xinhua - Global Times