NRA Assigns ‘AA.bs’ Business Stability Rating To GPB Global Resources B.V., Outlook Stable

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National Rating Agency has assigned its ‘AA.bs’ business stability rating to GPB Global Resources B.V. (GPB GR). The outlook for the rating is Stable. The Company gets a business stability rating from NRA for the first time.

GPB Global Resources is a group of companies engaged in oil and mineral resource projects in South America and Africa. Its key project is the development of onshore and offshore oilfields located on the Lake Maracaibo in Venezuela. The project’s proven oil reserves are 4,166 mmbbl as at 1st April 2017, of which 68% are offshore deposits that are relatively costly in terms of development CapEx. The project is carried out by Petrozamora S.A., a joint venture between GPB GR and PDVSA.  PDVSA has a 60% stake of the joint venture, and GPB GR owns a 40% stake through its subsidiary GPB Latin America Ventures.

The GPB GR corporate website is at www.gpb-gr.com

The assigned rating reflects the stable financial profile of Petrozamora S.A., the group’s key operating company, which is currently the only cash-generating investment asset of GPB GR. Petrozamora S.A. has a low debt burden and maintains performance metrics that make the investors comfortable despite the adverse changes in the market conditions that have occurred during the project implementation period since it started in 2012 (the company’s profit and profitability metrics remain strong after the plunge in oil prices which affected revenues). Oil production is expected to grow in the next few years due to higher capital expenditures. GPB GR has been demonstrating strong profitability throughout the period under review, in addition to its adequate equity level and low debt burden (at year-end 2016, 55% of its debt was transferred to Petrozamora S.A. in the form of loans and secured with future oil deliveries to offtakers). Importantly, the group fully controls the proceeds from its oil deliveries through a special collection account. The rating is also underpinned by the appreciation and increasing investment attractiveness of GPB GR’s key asset.

In NRA’s opinion, the rating is constrained by the poor diversification of GPB GR’s operating assets, considering the significant pool of available investment projects; the current adverse macroeconomic and political situation in Venezuela and its potential impact on the GPB GR joint venture’s activities (predominantly through negative changes in foreign exchange rules for tax purposes) that may affect both the joint venture’s and the parent’s profitability. However, NRA notes that the group’s forecast budget has been drafted based on a negative scenario, implying that the high profitability is maintained through increasing oil production and cost saving.

According to GPB GR’s audited consolidated IFRS financial statement, as of Dec 31, 2016, the group’s assets totaled US$ 1.36 bn, equity reached US$ 697.6 million, and debt was US$ 258.8 million, of which 88% was long-term debt.  The group’s key profitability driver is its share in net profit of Petrozamora S.A.  A small revenue is generated by advisory services, provided through GPB Neftegaz Services B.V. Net profit for the reporting year was US$ 199.3 million (with a ROA of 15%, and ROE of 28%), compared with US$ 284,9 (with a ROA of 22%, and ROE of 58%) a year earlier. According to the group’s unaudited financials for 1Q 2017, its assets increased to US$ 1.48 bn, and its equity reached US$ 760 million (with the equity-to-assets ratio of 0.5), while its debt decreased to US$ 254 million, with short-term debt accounting for less than 10% (with a permanent capital ratio of 0.7). Given the cash balance of the special collection account for proceeds from oil deliveries, used for the repayment of revolving and non-revolving credit lines, the group’s net debt was just US$ 2.2 million.