Petro Rio S.A.

The stable outlook incorporates our view that Petro Rio will be able to grow its production and productivity in the next few years, through revitalization processes and tiebacks as well as further acquisitions, which in turn could make credit metrics volatile. We expect gross debt to EBITDA to remain below 3.0x while production grows. We could lower the ratings if the company's production and sales are significantly lower than our projections because of delays in revitalization and tieback processes, or if oil prices are below our current price deck for a sustained period and the company is unable to reduce costs, resulting in lower EBITDA. We could also downgrade Petro Rio if it adopts a more aggressive acquisition and growth

...The equity follow-on completed in the beginning of this year provided significant liquidity cushion and will allow for higher investments aligned with Petro Rio's growth strategy. Petro Rio raised R$2 billion of cash with the follow-on. It will use the proceeds to pay for recently acquired fields (Wahoo and Itaipu) and additional working interests on Frade, totaling about $136 million. In addition, the company's capital expenditures (capex) plan includes investments on ongoing revitalization processes and tiebacks that should total about R$865 million in 2021 and R$1.6 billion in 2022. We also consider that the company will use part of the proceeds, combined with operating cash flows, for potential new acquisitions, since it operates mature fields with volumes expected to decline over time. The expected production increase, along with efficiency gains, will likely lead to debt to EBITDA below 2.0x in 2021 and 2022. Considering the completion of the tieback between TBMT and Polvo in the...

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