Standard & Poor’s places Nigeria’s Seven Energy on negative rate watch

Standard & Poor’s has today placed the B- long term corporate credit rating of Nigeria based oil and gas firm Seven Energy on a credit watch with negative implications because of a deteriorating liquidity position..

In a statement Friday, the global rating agency said, “in our view, the lower oil price environment is resulting in a lower operating cash flows for Seven Energy resulting in reduced financial flexibility and liquidity headroom.”

Standard & Poor’s said while the company is understood to be working to improve its liquidity position, “the timing and materiality of potential improvements remain uncertain at this stage.”

According to the agency, “our placement relates to the deterioration of Seven Energy’s liquidity position. Specifically, in our view, Seven Energy will have only marginal headroom under financial covenants in the future quarters of 2015, and there is a risk that debt maturities and capital spending commitments together totaling about $280 million for full year 2015, might require additional funding in the context of lower operating cash-flows.”

Seven Energy’s vulnerability was linked to the concentration of its asset base around the Niger Delta, its dependence on a few pipelines to transport its products and its relatively small operations by international standards.