Moody’s trims Tullow, view to negative

Moody’s Investors Service said it downgraded Tullow Oil plc’s corporate family rating to B2 from B1 and probability of default rating to B2-PD from B1-PD. Concurrently, the agency lowered the ratings on Tullow’s $650 million guaranteed senior unsecured notes due April 2022 and $800 million guaranteed senior unsecured notes due March 2025 to Caa1 from B3. The outlook on all Tullow’s ratings was changed to negative from stable.

“The downgrade of Tullow’s ratings and change in outlook to negative reflect management’s recent downward revision of its forward-looking production guidance following a review of the production performance issues experienced by the group in 2019 and its implications for the longer-term outlook of the fields,” said Moody’s in a press release.

Management confirmed its November production guidance of around 87 thousand barrels of oil equivalent (kboepd) for 2019, but it indicated group production is now forecast to average between 70 and 80 kboepd in 2020 and around 70 kboepd in the period 2021-2023. This compares to Moody’s earlier forecast production would rise to 96kboepd in 2019 (v. 90 kboepd in 2018) and stabilize at a level in the mid-90s in the medium-term, the agency said.

“The significant downward revision in Tullow’s projected production will lower its future cash generating and debt reduction capacity. This will in turn reduce the group’s financial flexibility to grow and diversify its production profile in the future by developing its existing hydrocarbon resources in Africa and pursuing exploration activities,” Moody’s said.

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