By Brazil Stock Guide – Prio (B3: PRIO3) received an upgrade to brAAA, the highest rating on S&P’s Brazil National Scale, after the agency concluded that the company’s acquisition of another 40% in the Peregrino field materially strengthens its operational profile, production scale and financial resilience. The US$1.545 billion transaction lifts Prio’s stake to 80% and adds roughly 40 kboe/d, positioning the company to surpass 150 kboe/d in 2026 once Peregrino and Wahoo are fully incorporated.
S&P projects adjusted net leverage of 4.0x in 2025, reflecting the acquisition and unplanned shutdowns at Albacora Leste and Peregrino. Even so, the agency expects a steep decline to 2.0x in 2026 and 1.2x in 2027, supported by higher EBITDA, stronger cash generation and a smoother production profile. The upgrade to brAAA signals that Prio now ranks among the lowest-risk issuers in the Brazilian credit universe, with above-average predictability, robust liquidity and proven access to capital markets.
Output Acceleration and Structural Cost Gains
With full consolidation of Peregrino and first oil from Wahoo expected in 1Q26, Prio’s production should reach 190 kboe/d in 2026, compared with roughly 106 kboe/d projected for 2025. The concentration of assets in the Campos Basin continues to enable operational synergies and efficiency gains.
Even with a softer Brent environment, Prio is set to maintain margins above the sector average. S&P estimates an EBITDA margin of 55% in 2025, rising to 65–70% in 2026 as Peregrino’s new gas pipeline reduces diesel use and Wahoo adds high-quality barrels with lower operating costs. Lifting costs are expected to fall from US$15.6/bbl to US$11.5/bbl next year.
Balance Sheet Reinforcement and Solid Liquidity
Prio strengthened its funding base through approximately US$400 million in bank credit lines, US$540 million in debentures and US$700 million in bonds, alongside a public tender offer to repurchase roughly US$430 million of 2026 notes. The company ended September 2025 with R$9.4 billion in cash, ensuring liquidity comfortably above needs for the next 12 months.
Annual capex of R$3.5–4 billion in 2025–26 will temporarily keep free operating cash flow tight, below 10% of net debt. But S&P expects FOCF to exceed 20% in 2026 as new volumes ramp up. Dividend distributions are projected to resume in 2027 at 50% of the previous year’s net income.
Stable Outlook Sustained by High Production and Controlled Leverage
The stable outlook reflects the expected completion of the remaining 20% Peregrino stake in 2026, the start-up of Wahoo and the maintenance of production above 150 kboe/d. A downgrade could occur if delays, weaker-than-expected oil prices or a more aggressive expansion strategy push leverage above 3.0x and reduce free cash flow below 20%. Upside is capped, as Prio has already reached the top of the domestic rating scale.