10:02 AM EDT, 06/05/2024 (MT Newswires) -- S&P Global Ratings on Tuesday assigned its "B" long-term issuer credit rating to Saturn Oil & Gas ( OILSF ) . Also, the rating agency assigned a "BB-" rating to the proposed second-lien secured US$625 million notes being issued by Saturn. It said the recovery rating is '1', which indicates its expectation of "very high recovery" for debtholders under a simulated default scenario.

"The ratings reflect Saturn's relatively small operating scale, limited geographic diversification, and elevated leverage. Partial offsets include the company's light-oil dominant product mix, competitive cost structure, and resulting strong projected free cash flow generation," the agency noted.

S&P said pro forma the proposed note issuance and announced acquisition, it projects average funds from operations (FFO) to debt of about 50% and debt to EBITDA of about 1.6x over the next two years.

It added the stable outlook reflects its expectation the company will generate significant positive free operating cash flow over the forecast period, with debt reduction as the primary use. It also anticipates the company will integrate the acquired assets and grow production under its existing low-cost structure and maintain adequate liquidity.

The Calgary-based exploration and production company's shares were up 0.4% on last look on Wednesday.

Price: 2.51, Change: -0.01, Percent Change: -0.40