S&P: Canadian Natural Resources Ltd.'s C$1 Billion Senior Unsecured Notes Due 2022 Assigned 'BBB+' Rating
"We expect proceeds from the bond issue will refinance existing bank debt, so the proposed debt issue should be neutral to the company's current capital structure," said S&P Global Ratings credit analyst Michelle Dathorne.
The 'BBB+' long-term corporate credit rating reflects our expectation that CNRL's business risk and financial risk profiles will continue to support the 'BBB+' rating throughout our 2016-2018 forecast period. Our assessment of the company's business risk profile benefits from CNRL's very large, liquids-focused reserves and production mix; the vertical integration benefits of its extensive infrastructure assets; and its upstream cost structure. Unit cash operating costs at the company's Horizon integrated oil sands mining project are higher than production costs for conventional oil and gas production. However, we believe CNRL's consolidated unit production costs, which have decreased in 2015 and the first half of 2016, should benefit from continued operating efficiency improvements, as well as the improving economies of scale as Horizon's production increases through 2017.
The company's fully adjusted cash flow metrics have deteriorated in 2015 and 2016, due to both increased debt levels incurred to complete the Horizon oil sands project's expansion phases and deteriorated crude oil and natural gas prices. Nevertheless, we believe CNRL's cash flow and leverage metrics should improve beyond 2016, as cash flow strengthen in tandem with rising production levels and our increasing hydrocarbon price assumptions in 2017 and 2018.
Under our current base-case scenario, we expect the company's financial risk profile should remain consistent with our significant assessment. We estimate CNRL's five-year (2014-2018), weighted-average funds from operations-to-debt remaining just above 35%, which our current outlook statement identifies as the upper threshold of the 30%-35% range necessary to support the positive comparable ratings analysis modifier and the 'BBB+' corporate credit rating.