Moody's20 Oct 2022 12:08
Hi!
Took the opportunity to review Moody's conditions a bit.
They have counted on numbers that do not correspond to the company's H1 number!
They manage to tip the production c. like me, somewhat low unit price maybe but fcf will be completely crazy as they don't take into account actual earned fcf, H1, of $332m.
Hence its low expectations for debt/Ebitda (yes, gross calculation) at year-end of 2.4x compared to my below calculated 1.37x.
Even Ebitda is going crazy wrong as the company in H1 had $536m and they have the year at $800m.
Okay that they want to calculate risk-adjusted and with $75 for oil, but doing it for the whole year when more than half the year has passed and the market has received its numbers is wrong.
Check my numbers instead if you want to see something serious.??
"RATINGS RATIONALE
Today's action balances the expected improvement in EnQuest's liquidity position upon successful execution of the planned refinancing transaction along with financial metrics progressively strengthening over the next 12-18 months under Moody's base case scenario.
At the same time, the rating action also reflects the uncertainty related to the refinancing because of challenging conditions of the debt capital markets. Should the refinancing not be successful, EnQuest will face debt maturities of around $0.9 billion due in a year's time.
Moody's base case scenario assumes stable production at around 48 thousand barrels of oil equivalent (boe) per day, average oil prices of $75/bbl for the remainder of 2022 and for 2023 and unit OpEx of $20-$22/boe.
Accordingly, EnQuest should generate Moody's-adjusted EBITDA of $800 million annually in 2022 and 2023, as well as Free Cash Flow (FCF) of $300 million and $200 million respectively despite rising cash outflows
for abandonment costs, capex and tax payments related to the recently-introduced Energy Profits Levy.
Assuming the senior unsecured notes are fully and timely refinanced and that positive FCF generation is primarily deployed towards progressive reimbursement
of pro-forma RBL drawings, Moody's projects key credit metrics to improve to levels commensurate with a potential rating upgrade, including gross debt to EBITDA declining to 2.4x by year-end 2022
and remaining within a 1.75x – 2.0x range in the medium term compared to 3.4x as at year-end 2021.
Conversely, if EnQuest does not fully refinance its outstanding senior unsecured notes then EnQuest's liquidity position would become increasingly challenging because FCF generation
and available cash balances under Moody's base case scenario would not be sufficient to redeem the retail and high-yield bonds due October 2023 at maturity. "
//To be continue
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