S&P gives International Petroleum B, notes B+

S&P said it rated International Petroleum Corp. B and assigned B+ issue and 2 recovery ratings to its planned $300 million of senior unsecured notes due 2026. The 2 rating indicates an expectation of substantial recovery in default.

“IPC's heavy oil exposure amplifies revenue and cash flow volatility. With heavy oil continuing to represent a large portion of IPC's product mix, estimated to account for about half of our projected daily average production, the company's revenue and cash flow generation will remain vulnerable to both West Texas Intermediate (WTI) price and Western Canadian Select (WCS) differential volatility. The combined exposure contributes to amplified cash flow volatility,” the agency said in a press release.

Additionally, “Projected positive discretionary cash flow in each of our forecast years should ensure gross fully adjusted debt does not increase. Although our fully adjusted FFO-to-debt ratio weakens beyond 2022, in tandem with our reduced oil and gas price assumptions in that year, we expect IPC will generate sufficient internal cash flow to fully fund projected capital spending to maintain production at the level we are estimating for 2022,” S&P said.

The outlook is stable.

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