"The rating reflects our opinion of Alaska's strong financial management, with very significant financial reserves to weather the current downturn in oil prices," said Standard & Poor's credit analyst David Hitchcock. "We believe this is a prudent policy in view of the state's revenue reliance on oil-derived revenues and the significant volatility in the price of oil," Mr. Hitchcock added.
The rating also reflects what we view as the continued extension of the North Slope oil production curve and a gradual slowing of the rate of decline in total oil production due to continued investments by oil companies in exploration and development activity in Alaska, and surveys indicating significant additional mineral potential; and a moderate debt burden, as the state continues to fund most capital projects on a pay-as-you-go basis.
"The stable outlook reflects our expectation that Alaska's windfall from historically high oil prices, which have produced unprecedented budget surpluses, will be available for a long period of time to stabilize lower revenues now that oil prices have declined," Mr. Hitchcock said.
We believe the state has built up substantial reserves to act as a buffer, giving Alaska the ability to provide essential services even under currently lower oil prices, as well as hedging against declines in North Slope oil production and further fluctuations in oil prices.
Alaska is geographically the nation's largest state, but it is also among the smallest in terms of population, with just 686,293 residents according to the U.S. Census Bureau.
Complete ratings information is available to RatingsDirect subscribers at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; select your preferred country or region, then Ratings in the left navigation bar, followed by Find a Rating.
Ana Sandoval, New York (1) 212-438-5095, [email protected]
Analyst Contacts:
David G Hitchcock, New York (1) 212-438-2022
Ian Carroll, San Francisco (1) 415-371-5060
Gabriel Petek, CFA, San Francisco (1) 415-371-5042
Key Contacts:
Americas Media Relations: (1) 212-438-6667
media_ [email protected]
Americas Customer Service: (1) 212-438-7280