S&P ups Brazos Permian II

S&P said it upgraded Brazos Permian II LLC issuer and term loan ratings to B- from CCC+. The recovery rating on the company's debt remains 3, which indicates meaningful (50%-70%; rounded estimate: 55%) recovery in default.

“Brazos demonstrated volume resiliency despite the commodities market downturn in 2020. The company's wellhead gas volumes increased by more than 20% to 367 million cubic feet per day in August 2020, compared with the average volumes during the spring months when commodity markets were most volatile,” S&P said in a press release.

“We project credit metrics to improve during the next 12-24 months. Brazos' adjusted leverage declined to about 8x in 2020 from above 11x in 2019, reflecting higher EBITDA and the $33 million repayment of the term loan B balance. The company saw a substantial increase in its operating cash flow and generated about $15 million of free cash flow in 2020. As Brazos' asset base is built out, it does not contemplate any major growth projects this year. We expect it to focus on debt reduction and forecast leverage 6x-6.5x in 2021, declining to 5.5x in 2022,” the agency said.

The outlook is positive.

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