Moody’s downgrades Tullow’s credit rating on slower oil price recovery
Lewis Njoka @LewisNjoka
Global rating agency, Moody’s, has downgraded Tullow Oil’s credit rating, saying it expected a more prolonged downturn and slower recovery of the oil prices in the next 12 to 18 months compared to previous expectations.
This, said Moody’s, will significantly affect the oil company. In a statement to newsrooms yesterday, Moody’s said it had downgraded Tullow’s Corporate Family Rating to Caa1 from B3 and the Probability of Default Rating (PDR) to Caa1-PD from B3-PD.
Moody’s also confirmed the Caa2 ratings assigned to Tullow Oil’s senior unsecured notes due in 2022 and in 2025.
The outlook on all ratings was changed to negative from ratings under review.
“While Moody’s positively recognises the measures taken by Tullow Oil in order to sustain its cash flow generation and the successful execution of the disposal of the stake in the Lake Albert Project in Uganda to Total SE, those will not be sufficient to offset the very weak operating environment for oil producers, heightened by the moderately declining production,” said Moody’s.
Moody’s expects a production around 65,000-70,000 barrels of oil per day for 2021 and 2022 from Tullow and limited hedging book in 2022 with only 3per cent or production hedged so far at $50/bbl specific to Tullow Oil.
“These would significantly affect the company cash flow generation going forward as Moody’s expects a broadly neutral cash flow generation in 2020 and 2021,” the rating agency said.