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Hunt Oil Co. of Peru L.L.C., Suc. Del Peru — Moody’s changes Hunt Peru’s

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Rating Action: Moody’s changes Hunt Peru’s outlook to stable; affirms Ba2 ratingsGlobal Credit Research – 01 Mar 2021New York, March 01, 2021 — Moody’s Investors Service (“Moody’s”) affirmed Hunt Oil Co. of Peru L.L.C., Suc. Del Peru’s (“Hunt Peru”) Ba2 corporate family rating and senior unsecured rating and changed the ratings outlook to stable from negative.Affirmations:..Issuer: Hunt Oil Co. of Peru L.L.C., Suc. Del Peru…. Corporate Family Rating, Affirmed Ba2….Senior Unsecured Regular Bond/Debenture, Affirmed Ba2Outlook Actions:..Issuer: Hunt Oil Co. of Peru L.L.C., Suc. Del Peru….Outlook, Changed To Stable From NegativeRATINGS RATIONALEThe change in Hunt Peru’s outlook to stable from negative reflects the solid revenue and cash flow recovery from the impact of the COVID-19 outbreak in 2020. Moody’s expects that the company’s operational and financial metrics will correspond to those of a Ba2-rated Exploration and Production company over the next 12-18 months.The Ba2 corporate family rating on Hunt Peru considers the company’s small production size; asset concentration in only two gas blocks; operating dependence on only two pipelines, owned by Transportadora de Gas del Peru (TGP) (Baa1 stable); no operating control over the gas blocks; vulnerability to commodities prices; high dividend payout rate and Moody’ expectation of continued volatile natural gas and natural gas liquids prices.On the other hand, Hunt Peru’s ratings are supported by the company’s large proved gas reserves, equivalent to about 18 years of life based on 2020 production; a solid asset base in the world-class, prolific Camisea gas fields; low volume risk given solid demand both in the local and international markets; the strategic importance of the Camisea fields to the Government of Peru (A3 stable); and the company’s experienced management team.Moody’s considers the debt agreement’s provisions in Hunt Peru’s unsecured notes, that help ring-fence Hunt Peru from its parent, to be beneficial to its credit profile since the notes represent 100% of the company’s debt.Hunt Peru has good liquidity. Cash in the amount of about $57 million in December 2020 plus around $260 million in cash from operations through mid-2022, as expected by Moody’s, will fund $75 million in debt amortization, $40 million in capital spending, plus $200 million in shareholders distributions in the period. Hunt Peru also counts on a $30 million three-year committed revolving credit facility that matures in May 2021 and Moody’s believes the company will renew shortly. Hunt Peru will start to amortize its senior unsecured notes in late 2021 (about $50 million annually).FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSHunt Peru’s Ba2 ratings are constrained by the high dividend payout to its parent company. A significant debt reduction on a sustained basis, without affecting its operating performance, could trigger a positive rating action on Hunt Peru’s ratings. The credit profile of Hunt Peru’s parent company, Hunt Oil Company, would be relevant information for Moody’s to…



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