Moody’s Affirms Seplat’s Corporate Family Rating, Outlook Positive
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, an official rating note revealed.
Concurrently, the ratings agency affirmed the Caa1 rating on its $650 million senior unsecured bond maturing in April 2026. The outlook remains positive, according to Moody’s.
Today’s rating action reflects Seplat’s recently announced completion of the acquisition of Mobil Producing Nigeria Unlimited (MPNU) from Exxon Mobil Corporation, Moody’s said, adding that transformational acquisition will strengthen its business profile and is credit-positive.
Moody’s said the acquired assets will improve the company’s oil mining license diversification and reduce Seplat’s exposure to oil mining licenses (OMLs) 4, 38 and 41, which represent about 70% of the company’s working interest production pre-acquisition.
The transaction was completed with almost three years of negotiations and approvals.
Moody’s said this will result in a materially larger group with an expected daily production increase to 115-120 thousand barrels of oil equivalent per day (kboepd) from an average of 45 to 50 kboepd as well as a 86% increase in 2P reserves.
However, Seplat’s rating is constrained by the company’s exposure to Nigeria and its political, legal, fiscal and regulatory environment with all assets and operations derived from the country, Moody’s said.
The acquisition purchase price was set at $1.28 billion in 2022 but after adjusting for locked box and $258 million deferred considerations due in December 2025, the payment at completion to Exxon Mobil is $800 million.
Moody’s explained that $128 million were already prepaid as a deposit and the remaining $672 million will be funded predominantly through debt.
The company has agreed on a new $300 million Advanced Payment Facility provided by Exxon Mobil and Seplat will also fully draw down its existing $350 million revolving credit facility.
This will result in higher Moody’s adjusted pro forma total debt levels that will be offset by an incremental EBITDA contribution from MPNU assets.
“We expect total debt levels to increase to almost $1.4 billion from $732 million as of September 2024 while Moody’s adjusted EBITDA will increase to $1.3 billion in 2025 under a $70 per barrel assumption from $561 million for the last 12 months to September 2024.
“As a result, we expect credit metrics will remain strong pro forma for the MPNU acquisition with net leverage below 1.0x, well within the company’s 2.0x net leverage target”.
The rating affirmation also takes into consideration Seplat’s positive trading conditions. According to Moody’s. 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’s interest coverage ratio measured as Moody’s adjusted earnings before interest tax depreciation and amortisation (EBITDA) to Interest Expense strengthened to 7.2x as of the last 12 months to September 2024 from 5.4x in 2023 while Moody’s adjusted Debt to EBITDA improved to 1.3x from 1.8x during the same period.
Nevertheless, the company has a large debt maturity approaching in April 2026 with the $650 million senior unsecured notes and in June 2025 with the $350 million RCF.
The RCF includes an automatic maturity extension until December 2026 once the $650 million notes are refinanced. Analysts expect that the company will refinance its capital structure in a timely manner.
Seplat rating is constrained by the company’s concentration in Nigeria, a lower-rated country that exposes the company to events risks; exposure to oil price volatility and highly cyclical market conditions; operations and assets concentration in the Niger Delta; and foreign currency transfer and convertibility risk derived from repatriation requirements for oil sales to Nigeria for at least 24 hours. #Moody’s Affirms Seplat’s Corporate Family Rating, Outlook Positive Lafarge Africa Rises by 28% as Investors Target Acquisition Price
