Standards and Poor Global Rating (S&PGR) has improved the rating of Nigerian Oil and Gas Company, Seplat to B on the back of expectations of impressive 2018 full year result.
‘’We expect indigenous Nigerian oil producer Seplat Petroleum Development Company will report strong results in 2018 supported by healthy oil prices and relatively low capital expenditure (capex) and dividends, In our view, this resulted in a reported net cash position as of end-2018,’’ the rating agency stated.
‘’We are therefore raising our issuer and issue credit ratings on Seplat and its $350 million notes due 2023 to ‘B’ from ‘B-,’’
The upgrade reflects the improvements Seplat made in 2018, both operationally and financially, which S&P viewed as ongoing, as the Oil and Gas company continues to de-risk and improve its business, with the Amukpe-Escravos Pipeline Project expected to be commissioned, and a final investment decision (FID) made on the Assa North and Ohaji South (ANOH) Gas Processing Plant.
According to S&P, “This somewhat reduces Seplat’s inherit weakness as a small oil and gas producer in the troubled Niger Delta region’’
The upcoming elections in Nigeria was identified as a likely factor that could delay potential transactions to toward the end of 2019, if anything happens at all this year.
S&PGR noted that it could lower the rating if militant actions and/or operational issues arose such that production was disrupted over the longer term although it does not consider the risk imminent.
‘’We think such a scenario will become less likely over time given the Escravos-Amukpe pipeline, increases in Seplat’s gas production, and potentially increased diversification following future acquisitions’’ S&PGR noted, adding that rating pressure could arise if the company undertook a large debt-financed acquisition resulting in a much less favorable capital structure.
SEGUN ADAMS
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