S&P hacks Canacol Energy ratings

S&P said it downgraded its ratings for Canacol Energy Ltd. and its senior unsecured notes to B- from BB-.

“Canacol has spent about $200 million in growth capex for the past 12 months, with no favorable production/reserve returns. Canacol's operating results are significantly below those of the nearest rated peer Crew Energy Inc. (B/stable/--) with 1P reserves growing by 17% and its replacement ratio of 129% as of Dec. 31, 2023. Hence, we revised our assessment of Canacol's business risk profile to weak from fair,” S&P said in a statement.

The agency noted, “The company generated $240 million in EBITDA in 2023, and we continue to expect $280 million in 2024, mostly related to the increase in contracted prices and stronger operating netbacks of 75%. On the other hand, since the company has fully drawn its RCF and given financial covenant limitations, adjusted debt will remain at $770 million and debt to EBITDA at 2.7x.

“In our opinion, access to financial markets is limited, and Canacol may rely on divestments of noncore assets, working capital financing alternatives, and/or delays in raising production to achieve sufficient sources of cash.”

The outlook is negative.

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