CAPEX S.A.
Fitch Ratings has affirmed
Fitch has also affirmed the company's
In addition, Fitch has assigned 'B-'/'RR3' rating to the proposed issuance of up to
Capex is rated two notches higher than
Per Fitch's 'Country-Specific Treatment of Recovery Ratings Criteria,'
Key Rating Drivers
Exchange Offer: The proposed bonds will be issued as part of an exchange offer whereby Capex's bondholders have two options to tender their current
Impact of Capital Controls:
Weak Operating Environment: Capex's ratings reflect regulatory risk given strong government influence in the energy sectors. Capex operates in a highly strategic sector where the government has a role as the price/tariff regulator and controls subsidies for industry players. Fitch estimates that oil and gas production comprised nearly 70% of 2023 EBITDA followed by approximately 20% from the electric business. Over the rating horizon, oil and gas business will remain a key contributor to cash flow generation, representing approximately 70% of the company's consolidated EBITDA.
Advantageous Vertical Integration: Capex is an integrated thermoelectric generation company whose vertically integrated business model gives it an advantage over other Argentine generation companies, especially given existing gas limitations in the country. Capex benefits from operating efficiencies as an integrated thermoelectric generation company and the flexibility from having its own natural gas reserves to supply its plant. The company's generating units are efficient and the proximity to its natural gas reserves in the Agua del Cajon field, coupled with gas transportation restrictions from Neuquen basin to the main consumption area in
Small Production Profile: Fitch projects the company's production to be on average roughly 17,500 boe per day (boed) from FY2024 to FY2027, with gas production representing approximately 54% of total output. As of
Moderate Medium-term Leverage: Capex's FY2024 gross leverage is estimated to be close to 3.0x mainly due to the due to lower oil prices than anticipated. It is then expected to decline to 2.0x by FY2027 due to the amortizing nature of the new notes. Fitch expects average EBITDA interest coverage to be strong at an average of roughly 6.0x over the rating horizon. Net leverage should be close at or below 3.0x over the rating horizon.
Derivation Summary
As a vertically integrated energy and electricity company, Capex 's 'CCC+' Long-Term Foreign and Local Currency IDRs reflect its exposure to CAMMESA as an offtaker for its electricity and gas revenues, as well as private offtakers for its oil revenues. Capex is rated one notch below
Capex is a small oil and gas producer with operation exclusively in
Capex's gross leverage is expected to be close to 3.0x in FY2024 due to lower realized oil prices, and expected to descend to 2.0x by FY2027. Capex's expected medium-term leverage is in line with than that of oil and gas peer PCR (3.0x in FY2023 and close to 2.0x by FY2025) and
Key Assumptions
Fitch's Price deck for Brent oil prices adjusted for Capex's FYE of
Natural gas production of approximately 9,500boed between fiscal years 2024-2027;
Realized natural gas prices at
Oil production reaching approximately 8,000boed between fiscal years 2024-2027;
Annual electricity production of approximately 4,500GWh;
Electricity prices denominated in Argentine pesos around
Total capex of approximately
No dividends payments between FY2024 through FY2027.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
An upgrade of
Net production rising on a sustainable basis to 35,000boed;
Increase in reserve size and diversification while maintaining a minimum 1P reserve life of at close to 10 years.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A downgrade by more than one notch of
A reversal of government policies that result in a significant increase in subsidies coupled with a delay in payments for electricity sales;
Sustainable production size decreased to below 10,000boed;
Reserve life decreased to below seven years on a sustained basis;
A significant deterioration of credit metrics to total debt/EBITDA of 4.5x or more.
Heightened refinancing risk pertaining to the bond due in
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Adequate Liquidity: As of
Issuer Profile
Capex is an integrated Argentine company dedicated to the exploration and exploitation of hydrocarbons and the generation of electric, thermal and renewable energy.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
RATING ACTIONS
Entity / Debt
Rating
Recovery
Prior
LT IDR
CCC+
Affirmed
CCC+
LC LT IDR
CCC+
Affirmed
CCC+
senior unsecured
LT
B-
New Rating
RR3
senior unsecured
LT
B-
Affirmed
RR3
B-
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