Ratings agency Moody’s has downgraded oil giant Tullow.
[contextly_sidebar id=”JbIff3ZziC4jxBCISsFZv8SKk0Il0x97″]Moody’s downgraded the corporate family rating and probability of default rating for Tullow to B1 from Ba3.
The ratings on its $650m 2020 and $650m 2022 senior notes were downgraded to B3 from B2.
Ghana’s recent downgrade by the rating agency as well as its current boundary dispute with Ivory Coast contributed to Tullow’s downgrade.
Moody’s a few days ago downgraded Ghana’s sovereign foreign-currency rating to B3, six levels below investment grade.
While the boundary dispute between Ghana and Ivory Coast could have a toll on Tullow’s operations in Ghana.
According to Moody’s ‘Tullow retains considerable concentration in Ghana, where its core Jubilee production field is located. As a result, Tullow’s CFR remains constrained by the ratings of its largest country of operations.
However, we continue to position Tullow’s ratings two notches above the sovereign rating of Ghana to reflect a number of risk mitigating considerations, including the off-shore production and direct international sales of crude, its US dollar-based pricing and its established and diversified financing framework, which does not depend on the domestic banking system in Ghana.
Finally, Tullow also enjoys a limited degree of cash flow diversification with approximately half of production in other West African countries.
Tullow’s fundamental business position remains solid, supported by its sizeable oil and gas resource base, which has been enhanced in recent years through successful exploration and appraisal programme leading to the opening of new hydrocarbon basins and significant oil discoveries, including in Ghana, Uganda and Kenya, that underpin the company’s long-term production growth trajectory’.
Moody’s also adds ‘we are looking in particular towards the timely development of the TEN project to help Tullow to recover its credit metrics and gain financial flexibility to manage any fiscal pressures in Ghana.
In this context, we are following the ongoing arbitration procedure between Ghana and Cote d’Ivoire over the maritime border, that relates to the area where the TEN project is located.
In particular, the Government of Côte d’Ivoire has recently applied for provisional measures to be ordered in Ghana’s maritime boundary dispute to require Ghana to suspend ongoing exploration and exploitation operations in the disputed area until the resolution of the dispute, which may affect the timely execution of the TEN project.
The negative outlook also captures the increased uncertainty generated by the maritime border dispute with Côte d’Ivoire.
Despite the downgrades, Moody’s said: “Tullow’s fundamental business position remains solid, supported by its sizeable oil and gas resource base, which has been enhanced in recent years through successful exploration and appraisal programme leading to the opening of new hydrocarbon basins and significant oil discoveries, including in Ghana, Uganda and Kenya, that underpin the company’s long-term production growth trajectory.”
Shares in Tullow slumped earlier this month amid concern that its Tweneboa-Enyenra-Ntomme (TEN) development off the coast of Ghana could fall behind schedule.
By: Vivian Kai Lokko/citifmonline.com/Ghana