$650m Notes: Moody’s Affirms Seplat’s Caa1 Corporate Family Rating
Moody’s Ratings has affirmed the Caa1 long-term corporate family rating (CFR) and Caa1-PD probability of default rating (PDR) of Seplat Energy Plc. In a rating note, the global rating agency said concurrently, its analysts have affirmed the Caa1 rating on its $650 million senior unsecured bond maturing in April 2026, saying the outlook remains positive.
Moody’s said its rating action reflects Seplat’s recently announced senior unsecured notes issuance to refinance its existing $650 million senior unsecured notes due in April 2026. Seplat’s $350 million fully drawn revolving credit facility (RCF) maturing in June 2025 will automatically be extended to December 2026 once the April 2026 notes are refinanced, the rating note said.
“We expect the transaction to have no impact on the company’s key credit metrics, including Moody’s adjusted leverage and interest coverage.
“For 2025, we project the company’s leverage, measured as Moody’s adjusted gross debt to EBITDA, to be between 1x and 1.5x, while interest coverage will improve to over 7x”.
Moody’s stated that Seplat’s strong cash flow generation, good liquidity, sizeable daily production, and 2P reserves could support a higher rating, however, the company’s operational exposure to Nigeria constrains the rating.
The rating affirmation also takes into consideration Seplat’s favourable trading conditions and 2024 strong operating performance.
The stability in oil prices despite a drop from post covid-19 elevated prices as well as Seplat’s production stability have resulted in a robust operating performance and strong credit metrics compared to other Africa based peers.
Seplat Energy Producing Nigeria Unlimited’s (SEPNU) acquisition in December 2024 will further enhance Seplat’s business profile and Moody’s expects yearly production to increase to more than 120 thousand barrels of oil equivalent per day (kboepd) from an average of 45 to 50 kboepd.
The rating note revealed that Seplat’s 2P reserves have also increased to 886 million barrels of oil equivalent (mmboe) from 478 mmboe as a result of SEPNU’s acquisition.
The Caa1 CFR reflects Seplat’s leading exploration and production (E&P) position in Nigeria with long-term oil and gas field licensing agreements and investment in gas projects, such as the ANOH project.
It also embodies the company’s ability to withstand low oil prices in the near term with positive free cash flow generation, a consequence of its low cost of production and more stable contracted gas revenue.
Also, it reflects strong credit metrics with Moody’s adjusted leverage for the next 12 to 18 month between 1x and 1.5x; and the company’s good liquidity position that provides a buffer against a potential decline in its operating cash flow from lower oil prices over the next 18 months.
Conversely, the rating is constrained by the company’s exposure to Nigeria and its political, legal, fiscal, and regulatory environment; exposure to oil price volatility and highly cyclical market conditions.
The constraints noted include operations and asset concentration in the Niger Delta that exposes the company to event risks; and foreign currency transfer and convertibility risk stemming from the requirement to repatriate proceeds from oil sales to Nigeria for 24 hours.
Seplat’s liquidity profile is good and supported by $470 million of cash on balance sheet. The company also has a fully drawn $350 million RCF as of December 2024.
“We expect Seplat to also benefit from positive operating cash flows to support capital spending of around $260 million to $320 million per year for the next two years, including investments in SEPNU assets”, Moody’s said.
The company has a track record of targeting to maintain around 70% of its USD cash in offshore accounts, which gives it access to US dollars for debt servicing. The RCF includes an automatic maturity extension until December 2026 once the outstanding $650 million notes are refinanced.
Moody’s said the positive outlook is in line with the positive outlook on Nigeria, reflecting Seplat’s close credit links to the Government of Nigeria and operational exposure to the country’s political, legal, fiscal and regulatory environment. AXA Mansard Plc. Climbs as Investors Bet on Earnings
