Fitch Ratings Affs Nuevo Energy's Sr Subordinated Rating.Business Editors CHICAGO--(BUSINESS WIRE)--Feb. 25, 2002 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed Nuevo Energy Company's (Nuevo) senior subordinated rating at 'B' and changed the Rating Outlook to Stable from Positive. The affirmation is based on Nuevo's modest credit profile and the size and scope of its operations. The change in Rating Outlook is due to Nuevo's limited credit improvement following two very strong years in terms of commodity prices. At year-end 2001, EBITDAX/interest, was 2.7 times (x) and total debt/EBITDAX was approximately 3.4x . An ill-timed hedging policy negatively impacted revenue and EBITDAX Earnings Before Interest, Taxes, Depreciation, Depletion, Amortization, and Exploration Expenses - EBITDAX An indicator of a company's financial performance calculated as: by more than $50 million in 2001. This follows the $150 million in lost revenue in 1999 & 2000. As a result, Nuevo did not improve its balance sheet like many of its peers did in the past two years. Year-end 2001 reserves were approximately 233 million boe with production split 88% oil and 12% gas. Its proved reserves proved reserves The quantity of minerals expected to be recoverable under current economic and operating conditions. The amount of proved reserves is important in valuing the stock of a company with significant holdings in natural resources. are predominantly oil (92%), mostly proved developed (86%), and are based primarily in California (90%). Its onshore properties in California represent approximately 58% of the company's total reserves and its offshore properties in California make up approximately 32% of Nuevo's total reserves. Nuevo also has reserves located onshore in the Gulf Coast region and offshore West Africa West Africa A region of western Africa between the Sahara Desert and the Gulf of Guinea. It was largely controlled by colonial powers until the 20th century. West African adj. & n. . A positive development for Nuevo was the recent hiring of its new CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , Jim Payne The name Jim Payne may mean:
oil and gas industry. Furthermore, he spent 25 years working in the California oil fields This list of oil fields includes major fields of the past and present. The list is incomplete; there are more than 40,000 oil and gas fields of all sizes in the world[1]. adjacent to much of Nuevo's current acreage so he is familiar with the makeup of its reserves. Additionally, Payne has made a number of changes in how Nuevo does business currently and how it will grow in the future. Most importantly Adv. 1. most importantly - above and beyond all other consideration; "above all, you must be independent" above all, most especially , he has gained more flexibility in constructing Nuevo's hedge policy. This will alleviate the problem the company had during the past two years. Secondly, Nuevo's cost structure should improve due to the cancellation of the Torch outsourcing agreement. Nuevo would also like to find a long-term natural gas source, which would help control the cost volatility associated with steam heating Steam heating A heating system that uses steam generated from a boiler. The steam heating system conveys steam through pipes to heat exchangers, such as radiators, convectors, baseboard units, radiant panels, or fan-driven heaters, and returns the resulting many of its Californian wells. Some items that will reduce capital expenditures and preserve the company's free cash flow include the elimination of EVA-based projects and the termination of the California exploration program. Using Fitch's 2002 price assumptions of $2.15/mcf for natural gas and $19.50/bbl for oil, Nuevo's credit profile will remain modest with EBITDAX approaching $120 million, providing interest coverage between 2.5x and 3.5x and debt/EBITDAX between 3.5x and 4.0x. Debt-to-capital will likely remain above 60% throughout 2002. While Fitch expects Nuevo to improve financially and operationally under this new management team, it is likely to be an intermediate term event. |
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