S&P ups Medco Energi

S&P said it raised its long-term issuer credit rating on PT Medco Energi Internasional to B+ from B and the long-term issue rating on the company’s guaranteed senior unsecured notes to B+ from B.

“We raised the rating because we believe Medco’s improved scale following the acquisition of Ophir will keep its capital expenditure to maintain production above 100 kboe/d at manageable levels. Medco’s record of debt reduction will also contribute to the company’s ratio of funds from operations (FFO) to debt sustaining above 12%,” said S&P in a press release.

Ophir adds scale and geographic diversity to Medco’s operations. The May acquisition increased Medco’s production by 29%, with Ophir’s production guidance for 2019 of 26 kboe/d. Medco’s pro forma production in 2019 was about 110 kboe/d, with a balanced mix across liquids (43% of total) and gas (57%). Following the acquisition, Medco now has operations in Thailand and Vietnam, with overseas volumes accounting for close to a fourth of total production. In addition, there are synergies that the company estimates at about $50 million on a full-year basis.

The outlook is stable.

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