DBRS Comments on Temporary Shutdown and Repair Plans for Deep Panuke Production Facility Centre

DBRS Limited (DBRS) has today received notice of an incident occurring on March 20, 2016, on the Production Facility Centre (the PFC) owned by SBM Deep Panuke S.A. (SBM or the Issuer), whose 3.50% Senior Secured Notes due 2021 (the Notes) are rated BBB (low) with a Negative trend by DBRS.

The Charter Agreement with Encana Corporation (Encana; rated BBB with a Negative trend by DBRS) gives it the option to terminate the Charter Agreement without compensation if the PFC is unable to process at least 50% of the available production for a sustained period of 120 days due exclusively to the fault or operational status of the PFC.

While the flare stack is awaiting repairs, the PFC has been shut down and, hence, the 120-day period has begun. The Issuer expects replacement of the flare tip and production restart by June 1, 2016. This date represents 74 days out of the maximum 120 days before Encana could acquire the termination option without compensation.

Under the terms of the Charter Agreement, if the PFC achieves at least 50% of available production for one day, then the relevant period of 120 days is not sustained and Encana would require a subsequent and separate period of 120 days to acquire the termination without compensation option.

DBRS has had extensive and detailed discussions with technical representatives of SBM Offshore N.V., which owns the Issuer. DBRS believes that the contingency plans in effect make it very unlikely that there will be a material delay to the expected production restart date.

DBRS will continue to closely monitor the situation; however, no rating action is currently expected as a result of the temporary shutdown of the PFC. There is no impact on the financial profile of the Issuer; during this temporary shutdown period, it continues to receive the revenues due to it under the Charter Agreement.

Notes:
The applicable methodology is Rating Project Finance (August 2015), which can be found on our website under Methodologies.

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