S&P gives Colgate Energy notes B

S&P said it gave B issue and 2 recovery ratings to Colgate Energy Partners III’s planned $400 million of unsecured notes. Colgate funded an acquisition through equity and will use the proceeds to help fund an acquisition.

Concurrently, the agency affirmed Colgate’s B- rating and changed the outlook to positive from stable.

“The positive outlook reflects our view that post acquisition, the company will quickly increase production and proved reserves over the next one to two years, generating significant positive free cash flow and maintaining modest credit metrics. We expect Colgate to pay out little to no dividends in the near future as it considers internal investments as well as its strategic exit opportunities in a consolidating industry. We expect debt to EBITDA of about 1.1x and funds from operations (FFO) to debt in the 85% area in 2022,” S&P said in a press release.

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