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Fitch Ratings has affirmed Dolphin Energy Limited’s (DEL’s) $1,250m 5.888 per cent secured bonds due 15 June 2019 and $1,300m 5.5 per cent secured bonds due 15 December 2021 at A+. The outlooks are stable. The affirmations follow DEL signing a $863m commercial facility agreement with several banks on 25 November.
The rating action reflects Fitch’s view that the additional debt does not have a negative impact on the credit quality of DEL’s bonds. Incremental debt is effectively only $363m (about 11 per cent) higher than our previous assumption under Fitch’s rating case, which already factored in additional permitted debt of $500m. The commercial facility will accede to the existing debt structure ranking pari passu with the other senior debt (including the bonds) and will amortise from 2016 to 2030.
Projected debt metrics under Fitch’s updated cases are now generally stronger, reflecting the most recent performance and contractual structure, in particular the additional volumes under the long-term contract with ADWEC and an upward revision of price assumptions for interruptible gas sales. The extension of the final debt maturity to 2030 does not worsen the credit profile due to the limited debt addition during the project’s tail years, sufficient reserves remaining and some buffer before the end of the Development and Production Sharing Agreement (DPSA) in 2032.
Fitch assessed DEL as stronger in respect of revenue risk despite partial exposure to market commodity prices. The project’s long-term fixed-price gas supply contracts currently account for over 40 per cent of DEL’s gross margin and substantially mitigate DEL’s exposure to commodity prices from upstream revenues. DEL can withstand significant oil price declines, able to break-even at a price of $1.3 a barrel under Fitch’s base case.
Fitch revised its previous price assumption for interruptible gas sales to about $6/MMbtu from $4.7/MMbtu increasing with inflation each year. This is based on the historical track record, updated market advisor’s projections and additional comfort from approximating the cost of alternative supply (importing liquefied natural gas or diesel).
DEL operates a large oil and gas project extracting gas from offshore fields in Qatar, processing it at Ras Laffan in Qatar and then exporting around 2 billion cubic feet a day of clean gas via a 364 km subsea pipeline to Abu Dhabi for onward sale in the UAE and Oman, mostly under long-term contracts. The project also produces a significant amount of condensate and liquefied petroleum gas which are by-products of the gas processing