Correction: Fitch Assigns First-Time Ratings to Pluspetrol Camisea and Pluspetrol Lote 56

Fitch Ratings release

This is a correction of a release published earlier today. It corrects the IDRs for PP88 and PP56 to 'BBB+' rather than 'BBB' and specifies that the Standalone Credit Profile for both entities is 'bbb'.

Fitch Ratings has assigned first-time ratings to Pluspetrol Camisea S.A (PP88) and Pluspetrol Lote 56 S.A. (PP56), including 'BBB+' Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs). The Rating Outlook is Stable for both entities. Fitch has also assigned a 'BBB+' rating to the potential issuance of up to USD 500 million, 12-year bonds for which PP88 and PP56 will be co-issuers. Fitch has assigned both entities a Standalone Credit Profile of 'bbb'.

The companies generate stable and predictable cash flows through contracted volumes and predictable prices in Peru, as the assets are strategically important to the country. Both companies have competitive cost structures. PP88 and PP56 also have a strong relationship with parent company Pluspetrol Resources Corporation S.A. (PRC S.A.)

Key Rating Drivers

Linkage to Parent Company: The ratings for PP88 and PP56 include weak legal, high strategic and medium operational links to parent company PRC S.A., which controls 100% of PP88 and PP56. As part of the Camisea Consortium, the companies have no direct impact on the decision-making process because all decisions are made as a consortium. However, PP88 and PP56 are the parent's top investments and significant sources of cash flow for it. In addition, participating in the Camisea consortium is critical for the parent's growth strategy as a global gas producer. The IDRs reflects sizeable consolidated liquidity that covers debt service of the issuers. 

Strong Capital Structure: PP88 and PP56 have strong credit metrics. As of December 2023, PP88's debt to EBITDA was 1.0x and PP56's was 0.9x, which is in line with historical averages. Fitch estimates that PP88's and PP56's leverage will average 1.5x over the rating horizon. The companies reported low leverage when measured by total debt to proven reserves in 2023. PP88's was USD0.90 per boe and PP56's was USD2.15 per boe. Fitch expects PP88's and PP56's FFO to average USD150 million and USD 70 million, respectively, through the rating horizon. These factors, plus dominant domestic market share, support the companies' stable and predictable cash flows from operations and maintain strong leverage profiles for both. 

Competitive Cost Structure, Positive FCF: PP88's and PP56's lifting costs are USD2/boe, which is highly competitive and at the top of the cost curve for the region. Half-cycle costs are at USD4.7 per boe. The companies' low cost profile coupled with moderate capex support positive free cash flow in both scenarios. Fitch estimates that FCF to average USD130 million for PP88 and USD 50 million for PP56, both assuming no dividends. 

Robust Operating Metrics: PP88's operating metrics are strong for the rating category. Camisea estimates that its reserve life will extend for more than 16 years, but the license agreements for the development of blocks 88 and 56 expire in 2040 and 2044, respectively. As of December 2023, Camisea's proved reserves for blocks 88 and 56 were 5,357 BCF (approximately 924 boe) of natural gas and 257 MMbbl of NGLs. Fitch expects gross production during 2024 for blocks 88 and 56 to reach approximately 267 million boe of natural gas, NGL and liquids.

The full release is available here.