S&P ups Quarternorth Energy

S&P said it raised its ratings on Quarternorth Energy Holding Inc. to B- from CCC+ and its $185 million second-lien term loan to B+ from B. The second-lien recovery rating remains 1, reflecting very high (90%-100%; rounded estimate: 95%) recovery in default.

“Successful results from its deepwater drilling program support a stable operating track record two years since inception. Quarternorth completed its 2022-2023 deepwater drilling program in the second quarter of 2023 and achieved its target production levels while strengthening its liquidity and leverage position, demonstrating improved management execution and operational effectiveness. We expect production in the second half of 2023 to reach 35,000-40,000 barrels of oil equivalent per day (boe/d), an increase from approximately 27,000 boe/d in the first half of the year,” the agency said in a press release.

The company paid down its first-lien facility in the second quarter of 2023 and paid a $200 million special dividend also in the second quarter. “Based on these actions and the lack of near-term maturities, we believe Quarternorth will likely use a portion of its free cash flow for more modest shareholder distributions in 2024,” S&P said.

The outlook is stable.

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