Baku, Azerbaijan, Feb. 4
By Elena Kosolapova - Trend:
International Rating Agency Moody's Investors Service assigned a B2 rating and a Loss Given Default (LGD) score of 4 (53 percent) to the proposed $400 million of notes to be issued by Kazakh Nostrum Oil & Gas Finance B.V. and jointly guaranteed on a senior basis by its indirect 100 percent parent, Nostrum Oil & Gas LP, and all of its subsidiaries, the agency reported on Feb. 4.
Concurrently, Moody's has affirmed Nostrum Oil & Gas's corporate family rating (CFR) and probability of default rating (PDR) at B2 and B2-PD, respectively. The outlook on the ratings is stable.
The proceeds from the issuance will be used for the sole purpose of financing a loan to Zhaikmunai LLP, a Kazakhstan-incorporated, 100 percent indirectly owned operating subsidiary of Nostrum Oil & Gas. Moody's understands that, following the issue, Zhaikmunai LLP will substitute Nostrum Oil & Gas Finance as the issuer of the notes, in line with the approach taken for the two existing issues.
The noteholders will benefit from certain restrictive covenants, including a negative pledge and restrictions on mergers and disposals.
Today's assignment of a B2 rating to the proposed $400 million in notes to be issued by Nostrum Oil & Gas Finance is in line with Nostrum Oil & Gas's corporate family rating, which is solidly positioned at B2. The B2 corporate family rating reflects the group's relatively modest scale of operations by international standards with current average daily production of approximately 45,000 barrels of oil equivalent per day, high field concentration with one field currently in operation, the company's large-scale investment plan, which includes Phase 2 of its gas treatment facility, an extensive drilling programme planned for the medium term and exposure to Kazakhstan's country and operational risks.
More positively, the rating also acknowledges the substantial improvement in Nostrum Oil & Gas's operating and financial metrics, following an increase in the company's oil production and the launch of Phase 1 of its gas treatment facility, the company's positive track record of implementing large investment projects, Nostrum Oil & Gas's good field geology, which accounts for the company's strong re-investment metrics and low production costs and its conservative financial profile and liquidity management.
The stable outlook on Nostrum Oil & Gas's ratings reflects Moody's expectation that there will be no movement in the company's rating over the short term, taking into consideration the active investment stage of the gas treatment facility project and exploration activity.
The ratings would experience positive pressure if Nostrum Oil & Gas were to demonstrate an ability to efficiently implement Phase 2 of the GTF project with minimal cost overruns and construction delays, sustainably grow production and feedstock base for the increasing gas treatment facility capacity in the medium term, adhere to conservative financial policies, and maintain strong liquidity.
Moody's could downgrade the ratings as a result of any developments that weaken Nostrum Oil & Gas's operational or financial profile, including a decline in production, continuous failure to replenish its reserves, a deterioration in its liquidity and financial profile and the imposition by Kazakh Government of material regulatory and/or contractual changes adversely affecting the economics of Nostrum Oil & Gas's operations.
Nostrum Oil & Gas LP (formerly known as Zhaikmunai LP), domiciled in the Isle of Man, United Kingdom, is an independent exploration and production oil and gas company operating in North-Western Kazakhstan through its fully-owned subsidiary Zhaikmunai LLP. The company's primary field and license area is the Chinarevskoye Field located in the northern part of the Pre-Caspian Basin. For the nine months ended 30 September 2013, Nostrum Oil & Gas reported revenue $657 million and EBITDA of $412 million.