S&P rates 3R Petroleum B+, notes BB-

S&P said it assigned 3R Petroleum Oleo e Gas SA a B+ issuer rating and a BB- issue rating to its planned senior secured notes. The recovery rating on the notes is 2, indicating substantial recovery (rounded estimate: 85%) in default. The outlook is stable.

“We expect Brazil-based junior oil and gas company 3R Petroleum Oleo e Gas SA to generate more cash from higher daily production. The company is revitalizing assets, mainly in its Potiguar and offshore clusters this year, which should result in average daily production of around 50,000 barrels of oil equivalent (boe) in 2024.

“We expect improved production and efficiency to boost profitability in 2024 and significantly improve credit metrics, with gross debt to EBITDA around 2.5x and funds from operations (FFO) to debt of 30% by the end of the year. Still, the company has lower production levels, reserves size, and geographic diversity than higher-rated global peers,” S&P said in a press release.

Going forward, the agency said it forecasts 3R to shave its gross debt to EBITDA to 1.5x in 2025 from higher cash generation.

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