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INVESTMENT
Fitch affirms Tecpetrol

Internacional’s IDR at BB

Fitch Ratings has affirmed Tecpetrol Internac-
ional’s Long-Term Foreign and Local Currency company’s medium production size, consist- Derivation Summary: Tecpint’s production
Issuer Default Ratings (IDRs) at BB. The Rating ent with the low BBB rated category, and rela- is expected to average 195,000 boepd over the
Outlooks are Stable. tively strong reserve life of approximately 13.1 rated horizon and maintain a strong 1P reserve
Tecpint’s ratings reflect its strong business years compared with peers. In 2021, Tecpint’s life of at least 10 years, which compares favora-
position, production profile, large reserve base, total owned production is expected to average bly with other BB rated oil and gas E& produc-
low leverage, and strong and predictable cash 170,000 boepd (62mn boe in the year) of which ers. These peers include Pan American Energy
flow profile supported by contracted volumes 80% is gas, and the remainder is liquids. As of (BB-/Stable) with 226,000 boepd and 21 years
and prices in both Peru and Argentina. Fitch year-end 2021, Tecpint had proved reserves of reserve life, Murphy Oil Corp. (BB+/Stable)
estimates nearly 90% of Tecpint’s EBITDA 750mn boe (80% gas and 20% liquids). with 171,000 of boepd and 14 years and YPF SA
comes from B rated or below operating environ- Strong Financial Profile: Tecpint’s contracted (CCC) with 480,000 of boepd and 5.4 years.
ments, with Argentina contributing 80%. volumes coupled with low cost production pro- Tecpint’s Argentine peer Pan American
Outlook remains stable reflecting stabilisa- file support its predictable cash flow profile. Energy is capped by Argentina’s B- Country
tion in the ratings of the operating environments Fitch estimates EBITDA of $1.2bn in 2021, up Ceiling but receives multiple notch uplift, due to
and the fact that Argentina’s CCC rating is not 40% compared with 2020, mostly due to coro- its strong liquidity profile and cash flows from
expected to affect the rating under its current navirus-related price corrections and an increase Bolivia and its Mexican operations. Pan Amer-
cash flow generation profile. Further, Tecpint’s in production across the board as the company ican Energy’s Positive Outlook reflects Fitch’s
leverage is conservative at 1.0x, and Fitch expects has focused investments in the Fortin de Pie- expectation that its Mexican operations, which
that the company will comfortably refinance or dra basin. EBITDA margin remains strong, began in 2020, will lift the country ceiling from
repay its $500mn senior unsecured note due in estimated at 68% in 2021, up from 61% in 2020 Argentina to either Bolivia or Mexico. YPF’s
December 2022. reflecting improved pricing and volume-driven rating is equalised with the country ceiling of
Key Rating Drivers, Diversified Asset Base: economics. Fitch estimates EBITDA margin will Argentina, due to the government’s 51% own-
Tecpint’s diversified asset base is a credit posi- be in the mid 50% through the rating horizon. ership and the company’s strategic importance
tive. Tecpint has oil and gas exploration and pro- FCF for 2021 is estimated at $207mn, and Fitch’s to the country.
duction operations in six countries across Latin base case reflects positive FCF through the rating Tecpint’s capital structure is strong. Fitch
America (Argentina, Peru, Ecuador, Mexico, horizon. Total debt to 1P reserves is $1.33 per expects gross leverage (total debt to EBITDA) to
Colombia and Bolivia) as well as gas transpor- barrel of oil equivalent, among the lowest in the be 1.0x in 2021, which is in line with Pan Amer-
tation and distribution in Argentina and Mex- region. ican Energy at 1.5x, and both are lower than
ico, and electricity generation in Mexico. The Contracted Gas Production in Argentina: Murphy Oil (2.5x) and YPF (4.3x). On debt to
company’s principal reserves are in Peru (19%), Tecpint has minimal volume risk as a majority 1P reserves, Fitch estimates Tecpint’s 2021 debt
Bolivia (3%), Colombia (3%), Mexico (1%) of its revenues are contracted under Plan Gas to 1P reserves are $1.3 boe, comparable with Pan
Ecuador (5%) and Argentina (70%). Approxi- 4 (PG4). In 2021, Fitch assumes Under PG4 an American Energy at $1.49 boe, and stronger
mately 70% of E&P revenues come from sales of average annual gas production of 14mn cubic than Murphy Oil ($4.34 boe) and YPF ($8.75
oil and gas and services from Argentina. metres per day sold at $3.6 mmBtu through boe).
Camisea Stake: Tecpint’s 10% ownership 2024, resulting in an average revenue of $705mn Fitch Ratings, February 22 2022
stake in blocks 88 and 56 within the Camisea per annum. Tecpint is exposed to payments
natural gas field in Peru, which is estimated to from the Argentine federal government, which,
contribute nearly 9% of its EBITDA in 2021, despite a history of payment delays, has main- PERFORMANCE
provides stable and predictable cash flows far tained payables to Tecpint under 30 days in the
beyond the maturities of the company’s debt last two years. Further, given its strong liquidity Gran Tierra Energy
obligations. Fitch forecasts Camisea’s contri- and cash flow profile, Fitch does not expect a
bution to Tecpint’s EBITDA will alone be more material impact on the company over the rated announces Q4-2021 and
than adequate to cover interest expense, on aver- horizon, should the Argentine government sig-
age 3.1x, in 2021. nificantly delay payments. full-year 2021 results
Camisea’s reserve life is estimated to extend Impact of Capital Controls: The rating case
for more than 25 years, although the license assumes that Tecpetrol S.A. will refinance its Gran Tierra Energy, an oil and gas exploration
agreements for Camisea’s two blocks, 88 and $500mn senior unsecured notes guaranteed and production company; announced financial
56, expire in 2040 and 2044, respectively. Con- by Tecpint, in compliance with the 60/40 rule. and operating results for the fourth quarter and
cerns about the political environment in Peru, Fitch estimates Tecpint’s Argentine EBITDA will the year ended on December 31, 2021.
with rumored intentions of nationalisation of average $800mn and non-Argentine EBITDA Firstly, despite impacts on production in the
assets by the Castillo administration, have now will average $400mn per annum between 2022 oil and gas sector; due to national protests in
eased and there are no visible material risks to and 2024. The company will have to continue to Q2-2021 and localised blockades in South Putu-
the Camisea stake in the short to medium term. manage the expected devaluation of the Argen- mayo during the Quarter; Gran Tierra achieved
Strong Production Profile and Hydrocar- tine peso, high inflation, and will be limited how 2021 average working interest production of
bon Reserve Life: Tecpint’s ratings reflect the much debt its Argentine entity can repay. 26,507 bpd), a 17% increase from 2020.

P14 www. NEWSBASE .com Week 09 03•March•2022