Wednesday, June 10, 2020 / 10:40 AM / by Moody's Investors Service/ Header Image Credit: Seplat Petroleum
Moody's Investors Service ("Moody's") has completed a periodic review of the ratings of Seplat Petroleum Development Company Plc (Seplat) and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since 1 January 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion.
This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
Key rating considerations are summarized below.
Seplat's B2 rating reflect its leading exploration and production (E&P) position in Nigeria with long-term oil and gas field licensing agreements and ability to withstand low oil prices in the near term. This is supported by short term oil hedges and contracted gas revenue representing 29% of 2019 revenue. In addition, Seplat's moderately positioned credit metrics and sizable unrestricted cash balances, provide a buffer against a decline in its operating cash flow from lower oil prices over the next 18 months.
The ratings are constrained by the company's exposure to volatile oil prices; small scale of production; concentration to a single asset block, Oil Mining Licences (OML) 4, 38 and 41 which account for 70% of the company's working interest production; and operational concentration to a single country, Nigeria (B2 negative) with reliance on Nigerian government-owned entities for the timely payment of capital cash calls. Moody's also note that there are significant uncertainties related to the impact of the coronavirus on the company's credit metrics and liquidity as well as the shape of a future recovery of crude oil prices.