July 2, 2012 / 1:33 PM / 5 years ago

TEXT-S&P: OGX ratings unchanged by lower production

(The following statement was released by the rating agency)

July 02 - Standard & Poor’s Ratings Services said today that its ratings on Brazil-based oil and gas producer OGX Petroleo e Gas Participacoes S.A. (OGX: B/Stable/--) are not affected by the company’s recent announcement of lower production in the Tubarao Azul Field. The new flow rate of 5,000 barrels of oil equivalent per day (boed) is down from between 4,000 and 18,000 boed. The ratings on OGX already incorporate the company’s preoperational phase, the project’s execution risk, and resulting uncertainties regarding its ability to achieve expected production levels during the next two years. Ramping up production continues to be its main risk. We still expect weak financial results and credit metrics during 2012 with marginal positive EBITDA generation and a gradual recovery throughout 2013; but OGX will remain highly leveraged. Our rating incorporates a conservative production scenario. We assume that the company will be able to produce at least 40,000 boed in 2013. On the other hand, the company does not have any significant debt maturities until 2018 when the $2.6 billion bond is due. As of March 31, 2012, OGX had $3.6 billion in cash. We will continue monitoring the company’s production. Any further delays in production ramp up affecting OGX’s cash generation and thus cash flow protection measures could pressure the rating.

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