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Newly-formed Aker BP given Ba2 credit rating

Staff Writer | June 14, 2017
In assigning a credit rating to newly-formed exploration and production company Aker BP, Moody's said the sector remains weak, but good opportunities exist.
Aker BP
Oil exploration   Speculative and subject to risk
Aker BP, a merger of Norwegian energy companies and a national subsidiary of BP, emerged late last year and reported adjusted earnings before interest, tax, depreciation and amortization at $485 million for the fourth quarter.

On Wednesday, Moody's assigned a Ba2 rating - a level described as speculative and subject to risk - after the company proposed $500 million in unsecured notes to help repay its debt obligations

In a statement of rationale, Moody's said Aker BP had a "strong financial profile," provided oil prices stay in a range between $40 and $60 per barrel.

Aker BP is a mid-sized exploration and production company with a strong portfolio on the Norwegian continental shelf. Operating costs there are low by relative standards at about $11 per barrel.

The company reported first quarter production of 145.3 million barrels of oil equivalent, an increase of 14.8 percent from the previous quarter. Most of the company's output came from the Alvheim license area, which draws oil using a floating production facility from four fields in the greater region.

Moody's said Aker BP remains constrained by a portfolio that's more or less isolated to offshore Norway. The Alvheim area accounted for more than half of the company's total production last year and it has a small asset base compared with some of its peers.

The ratings agency said it expected crude oil prices to hover around $50 per barrel "in the near future."

"We expect the company's financial profile to deteriorate to some extent as a result of the decline in production until 2019, still fairly strong compared to similarly rated peers," the ratings agency stated.

Recovery would come from Aker BP's role in the mega Johan Sverdrup project offshore Norway, provided it starts as expected in 2020.