Fitch assigns Strathcona, notes B+

Fitch Ratings said it gave B+ ratings to Strathcona Resources, Ltd. and its planned $500 million of senior unsecured notes. The notes’ recovery rating is RR4. The agency also assigned BB+RR1 ratings to Strathcona’s revolver and term loan.

“Strathcona's ratings reflect its low decline Canadian asset base, high liquids mix, improved liquidity and maturity profile via the proposed unsecured notes issuance, sub-1.5x leverage profile and positive FCF expectations. These factors are partially offset by potential funding and execution risks around the company's M&A growth strategy, exposure to volatile Western Canadian Select (WCS) spreads, and modestly less concentrated asset profile, which leads to cash netbacks below Canadian peers,” Fitch said in a press release.

The company will use the proceeds reduce the revolver balance and reduce the term loan by C$100 million. “Fitch views the transaction positively given the liquidity improvement and believes the extended maturity profile provides time for the company to execute on its M&A growth strategy.”

The outlook is stable.

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