By Brazil Stock Guide – PRIO S.A. (B3: PRIO3) received a credit-rating upgrade after completing the acquisition of an additional 40% stake in the Peregrino offshore oil field, a transaction that materially expands the company’s production scale, reserves and cash-generation capacity. Moody’s Ratings lifted PRIO’s corporate family rating to Ba2 from Ba3 and revised the outlook to stable, citing the transformational impact of the deal and expectations of rapid deleveraging over the next 12 to 18 months.
The $1.5 billion transaction with Equinor increases PRIO’s ownership of Peregrino to 80%, with operatorship, and adds more than 40,000 barrels of oil equivalent per day to output. Total production now exceeds 150,000 barrels per day, a jump of nearly 59% from September 2025 levels. Peregrino alone produces around 100,000 barrels per day and is located near PRIO’s Polvo and Tubarão Martelo assets in Brazil’s Campos Basin.
Leverage rose temporarily as PRIO financed the acquisition, with adjusted gross leverage peaking at 3.8 times EBITDA over the 12 months ended September 2025. Moody’s expects that ratio to fall to around 1.5–2.0 times as Peregrino’s EBITDA is fully consolidated. Net leverage is forecast to decline more sharply, reaching 0.5–1.5 times within 18 months, restoring metrics closer to PRIO’s historically conservative balance-sheet profile.
The rating agency highlighted PRIO’s cost structure as a key credit strength. Lifting costs average $12.8 per barrel, with full-cycle costs estimated at $25–30 per barrel and breakeven levels between $20–25, providing resilience even under weaker oil-price scenarios. Additional efficiencies are expected once the Wahoo field comes online in 2026, using existing FPSO infrastructure, which should further support free cash flow generation.
Liquidity was cited as robust. PRIO held approximately $1.8 billion in cash at the end of September 2025 and is expected to generate $1.5–2.5 billion in free cash flow through commodity cycles, comfortably covering annual capital expenditures of roughly $600 million. A tender offer completed in October reduced refinancing risk by lowering exposure to secured notes due in 2026.
Despite the upgrade, structural constraints remain. PRIO is still small relative to global peers, with a concentrated asset base and exposure to mature fields with annual decline rates near 10%. Growth remains acquisition-driven, increasing execution and integration risk.
The stable outlook reflects expectations that production growth from Peregrino and Wahoo will restore credit metrics to pre-acquisition levels while preserving adequate liquidity. Further upgrades would require greater production diversification, output approaching 250,000 barrels per day, and sustained improvement in cash-flow coverage ratios. Conversely, weaker-than-expected cash generation or a deterioration in liquidity could pressure the rating.
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