The recent announcement by the Chilean state oil company, which would be looking to enter the debt market soon, is positive xxxx
It is said that maintaining a good dose of debt is healthy. Real or not, the truth is that the Chilean state-owned Empresa Nacional del Petróleo (ENAP) could enter the debt market in the coming days, after commissioning BofA Securities, Itaú BBA, JP Morgan, Santander, and Scotiabank to manage calls with investors, as stated on Monday by the IFR agency, a financial service of the London Stock Exchange, LSEG.
Although consulted about this by AméricaEconomía the oil company declined to make statements, the specific thing is that ENAP also announced on the day a cash purchase offer for all its notes in circulation at 3.750% and maturing in 2026, up to US$200 million of aggregate capital. of its outstanding debt at 3.450% due in 2031, subject to a maximum aggregate consideration of $800 million, IFR assured.
Proceeds from the potential bond offering, subject to market conditions, will be used to pay the repurchase offer and the difference, if any, for general company purposes.
GOOD SIGNS
The movement of the state oil company is described as a good sign.
"Given that ENAP is modifying its financing instruments, also generating a payment of the repurchase offer and the difference through the issuance of a bond offer, this would produce financial stabilization in the ENAP company and, on the other hand, good projections for use an instrument that can be profitable for the company," economist Marcela Vera, an academic at the University of Santiago de Chile, explains to AméricaEconomía.
This is something positive compared to other situations of public companies that may present the same type of situation and yet remain subject to the vagaries of the market, indicates the professor at the Faculty of Administration and Economics of the state university.
"This not only stabilizes but also allows us to give a very good signal to the market since ENAP is a company backed by the State but at the same time it is a company that seeks instruments that allow it to produce stability and confidence regarding the type of financial instruments that ENAP is using," he adds.
Vera maintains that "it is a good deal for ENAP and generates good signals to the market (...) It is to be expected that they will offer the bonuses through the Book building system." This consists of probing the intention of investors interested in the securities, as well as the price and quantity they would be willing to purchase.
"This then allows us to know who the buyers could be and what prices they would be willing to pay. This often generates returns for a state since you know ultimately what the market prices that your bonds would demand would be and this often generates a reduction in the cost of financing this type of instruments," emphasizes the economist.
FINANCIAL RESULTS
In any case, this new debt is a step that moves away from the objectives of its so-called Plan 2024-2028, Enap's focus is to continue capitalizing on market conditions to reduce debt, optimize operations and advance the energy transition.
In this context, for this period Enap considers flexibly maintaining an investment plan of US$ 3.5 billion (subject to financial performance), which allows addressing aspects such as integrity and performance of refinery and logistics assets, operational excellence and safety. of processes, compliance with environmental commitments and the development of new businesses.
In the presentation of the results obtained in the 2023 period, the company highlighted profits of US$ 566 million, a historical Ebitda of US$ 1,414 million and the decrease in financial debt by US$ 602 million.
In May, after presenting the results for the January-March 2024 period, Enap highlighted an Ebitda of US$ 247.9 million and profits of US$ 110.5 million, also reporting a decrease in margins in the refining activity, the which was partially offset by the optimization of the cost of the crude oil purchasing basket.
On that date, Enap reported that it had achieved a reduction in its debt of US$1,000 million and that with the good results of the first quarter of 2024, it was entering its fourth consecutive year with positive numbers.
According to Moody's data, Enap's debt as of December 2022 was US$4.5 billion and during 2023 it had been reduced to US$3.9 billion.
GOOD GRADES
ENAP has Baa3 credit ratings from Moody's, BBB- from S&P, and A- from Fitch, all with a stable outlook.
At the end of May, the international risk rating agency Standard & Poor's (S&P) announced the improvement of the risk classification of the National Petroleum Company (Enap) from 'BB+' to 'BBB-', placing it in what is known as “investment grade” or investment grade.
"This update reflects the “improvement in the company's operating results and credit metrics,” says Enap on its website.
The outlook for this classification is in the “Stable” category.
S&P indicated that this decision is based on the solid results presented by the company in recent years and on the expectation that Enap will maintain its operations and credit metrics in the coming years. This improvement is attributed to the state company's “implementation of a strategic plan for 2023-2027, which includes a more disciplined approach to operations and debt,” according to the rating agency.
Likewise, Enap's Stand Alone Credit Profile (SACP) also increased from 'b' to 'b+', reflecting the strengthening of the company's financial risk profile. In addition, S&P maintained its assessment of “a very high probability of support” in the event of financial difficulties from the Chilean government, Enap's sole shareholder.
The entity noted that the improvement in Enap's credit metrics is due to more effective and disciplined management, which includes the gradual reduction of debt. Highlights include its self-sufficiency mandate, management aligned with OECD standards, cost containment policies and a focus on targeted investments to maintain asset integrity. Furthermore, the diversification of oil suppliers and proactive management of refinancing have been key factors in this improvement.
At that time, Enap's general manager, Julio Friedmann, highlighted that “the focus we have placed on taking charge of our financial backpack, aligned at all times with the Board of Directors and our shareholder. The challenge is to advance the operational excellence and efficiency of our management, in order to maintain these indicators in the future and guarantee the sustainability of the company."
S&P's stable outlook reflects the expectation that the state-owned company will maintain a debt/Ebitda ratio around or below 4x over the next two years, with capital initiatives aligned with this objective, as well as that Enap continue its strong relationship with the Chilean government, playing a crucial role in the country's energy sector.
