(Alliance News) - Moody's Investors Service on Wednesday downgraded petroleum production firm EnQuest PLC's corporate family rating to Caa1 from B3.
The outlook was changed to stable from "ratings under review".
This concludes the review for downgrade initiated by Moody's on March 25.
The rating downgrade reflects Moody's expectation that - despite the rebound in oil prices since mid-April and the significant cuts in operating costs and capital expenditure - an extended period of low oil prices averaging USD35 per barrel over the 2020-2021 period would require a third of the final amortisation of USD360 million due under the company's credit facility in October 2021 to be refinanced.
EnQuest's ratings continue to be underpinned by its robust operating track record as an efficient independent UK North Sea oil & gas company, Moody's said.
The stable outlook, meanwhile, reflects Moody's expectation that efforts to control operating costs and reduce capital expenditure in the near term will help EnQuest remain free cash flow positive even in the absence of any meaningful oil price recovery, and limit any further deterioration in its leverage metrics.
Looking ahead, Moody's said, while an upgrade is currently unlikely, EnQuest's ratings could be upgraded should a sustained recovery in operating profitability boost free cash flow generation.
Conversely, the ratings could come under pressure should persistent weakness in cash flow generation lead to some further deterioration in the company's liquidity profile and leverage metrics.
EnQuest shares were trading 0.4% lower in London on Wednesday at 14.34 pence each.
By Evelina Grecenko; evelinagrecenko@alliancenews.com
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Enquest (ENQ)