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The Pakistan Credit Rating Agency Limited
Press Release

Date
15-Jan-20

Analyst
Saadat Mirza
saadat.mirza@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Spud Energy Pty Limited (Pakistan Branch)

Rating Type Entity
Current
(15-Jan-20)
Previous
(16-Jul-19)
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Spud Energy Pty Limited (Pakistan Branch) is engaged in upstream Oil and Gas business in Pakistan. The company is a wholly owned subsidiary of Jura Energy Corporation, public company listed on TSX Venture Exchange. The Board of Jura Energy Corporation, comprising six members, exercises oversight over the company. The control environment is considered a plus. Auditors of the company are A. F. Ferguson & Co, Chartered Accountants. Currently, the company has 40% working interest in Zarghun South Development and Production lease, from where the company is predominantly deriving its revenue. The other revenue stream is from the Guddu Block with three different Development and Production leases. The impact of circular debt prevailing in the country is a concern, yet the lag is not significant in case of Spud Energy Pty Limited (Pakistan Branch) particularly. The strength of the business reflects in the US dollar based pricing and its collection in US dollar directly into the foreign currency bank accounts. Spud Energy Pty Limited's (Pakistan Branch) management is pursuing an expansion strategy with the aim to make additions to its revenue stream which would support the business bottom line. This is expected to be debt driven. Company is expecting a sizeable contribution to the revenue during 1QCY20 from the development well ZS-4 in Zarghun South. Yet, the cash flow position is considered supportive. The company has a receivable from a group company, where the operational revenues are close to materialization.
The ratings are dependent on sustained competitive positioning of the company, while upholding good governance practices through its parent Company i.e. Jura Energy Corporation. Volatility in business margins and prevailing inter-corporate circular debt issue in the oil and gas industry of Pakistan remain key areas of consideration. Financial discipline is considered core to the ratings, with enduring emphasis on maintaining relevant coverages and fulfilling the debt covenants.

About the Entity
Spud Energy Pty Limited, a Company with limited liability, incorporated in Australia on May 2, 1996. Spud Energy operates in Pakistan through a branch office in Islamabad.

The BoD of Spud Energy Pty Limited comprises of three members. The decision making for Spud Energy Pty Limited is carried out by the parent company’s board i.e. Jura Energy Corporation which afterwards is disseminated downward to Spud Energy Pty Limited’s board. Jura Energy Corporation’s comprises of six members, out of which three are independent, two are non-executives and one is an executive director.The management team is headed by Mr. Nadeem Farooq as Chief Executive Officer. He is assisted by a small and competent team of industry professionals.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.