S&P lifts Vermilion Energy

S&P said it raised its ratings on Vermilion Energy Inc. to B+ from B and its $300 million of senior unsecured notes to BB- from B+. The 2 recovery rating is unchanged.

“We estimate Vermilion will generate improved credit measures following the upward revision to our oil and gas price assumptions. Oil prices have remained on an upward trajectory since early 2021 and while the Russia-Ukraine conflict has spiked them, we believe global supply and demand fundamentals have strengthened and should support higher near-term prices,” S&P said in a press release, which also noted stronger natural gas prices.

“Based on these pricing updates, we project the company will generate an adjusted FFO-to-debt ratio of more than 60% in 2022 and 2023. The improvement is also led by our expectation for further absolute debt reduction (the company reduced gross debt by C$282 million in 2021) and production increasing to close to 100,000 barrels of oil equivalent (boe) per day by 2023 (pro forma acquisitions) from 85,000 boe per day in 2021. We also believe downside risk is limited to an extent given the hedges in place; Vermilion has hedged more than 50% of its natural gas exposure for 2022 and almost 30% in 2023,” the agency said.

The outlook is stable.

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