Moody’s changes Nostrum to negative

Moody's Investors Service said it changed the outlook on all ratings of Nostrum Oil & Gas plc to negative from stable.

At the same time, the agency affirmed the B2 corporate family rating of Nostrum and the B2 senior unsecured rating of Zhaikmunai LLP, a wholly owned subsidiary of Nostrum, the issuer of senior unsecured $400 million and $560 million notes, jointly and severally guaranteed by its parent, Nostrum, and all of its subsidiaries.

Nostrum's probability of default rating was affirmed at B2-PD.

Moody’s said the change in outlook is primarily driven by falling oil prices and its view that it will be challenging for the company to maintain its credit profile within the current rating category over the next 12 to 18 months, in light of the recent sharp decline in earnings as a result of the continued low oil prices.

This could nevertheless be mitigated if the gas treatment unit (GTU) 3 is put into operation as planned at the end of 2016, and if it materially contributes to cash flow generation from 2017, and/or oil prices recover substantially. Brent crude currently oscillates at below $50/barrel (bbl) down from $112/bbl in June 2014.

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