Ithaca Energy affirmed by S&P Global Ratings at CCC+ as parent finances firm up

Ithaca Energy Ltd. was affirmed by S&P Global Ratings on Jan. 28 at CCC+ and stable, removing it from Credit Watch, where it had been "with developing implications" since May 2020. Ithaca's $500 million senior unsecured debt remains rated CCC.

S&P Global Ratings said that Ithaca's ratings reflect the financial health of its corporate parent, Delek Group Ltd., which Ratings said had been "on the verge of default in the first half of 2020." Ratings noted that Delek subsequently raised capital and sold assets to reduce debt, but the ratings agency now believes Delek has nearly $1 billion of debt that needs to be repaid in the next two years.

Ratings said that Delek "will likely be unable to" repay that debt from cash flow and will need additional divestitures and "supportive credit markets, which are uncertain at present." Ithaca is now Delek's largest asset, prompting Ratings to believe "it is going to play a key role in Delek's recovery journey." Ratings expects Delek to divest a portion of Ithaca in the upcoming quarters to meet its own obligations.

Ratings believes that in 2020, Ithaca produced free cash flow and reduced net debt by roughly $300 million, to $1.2 billion at Dec. 31, 2020, translating into 2.4x-2.5x leverage. Ratings anticipates Ithaca's credit metrics will "be under pressure in 2021 compared with 2020," projecting leverage at 3.2x-3.6x.

Ithaca is involved in exploration, development and production of oil and gas in the U.K. North Sea.