TEXT-S&P: EPL Oil & Gas rating unchanged by added notes
Oct 15 - Standard & Poor's Ratings Services today said its 'B-' senior unsecured rating on EPL Oil & Gas Inc.'s (EPL) 8.25% senior notes due 2018 is unchanged after the company announced it will seek to add $250 million to the existing $210 million notes outstanding, bringing the total issue amount to $460 million. The recovery rating on the notes is '5', indicating our expectation of modest (10% to 30%) recovery in the event of a payment default. The 'B' corporate credit rating and stable outlook on EPL are unaffected. The exploration and production company intends to use proceeds to fund a portion of the purchase price to acquire the shallow-water Gulf of Mexico assets from Hilcorp Energy I L.P (BB-/Stable/--). The estimated proved reserves of the assets being acquired are 36 million barrels of oil equivalents, with an estimated average net daily production of 10,000 barrels of oil equivalent. Pro forma for the proposed transaction, we expect credit measures to remain satisfactory for the ratings. The ratings on U.S.-based EPL Oil & Gas Inc. reflect Standard & Poor's assessment of the company's "vulnerable" business risk and "aggressive" financial risk profiles. The ratings incorporate the company's relatively small reserve base, limited scale, high concentration in the Gulf of Mexico shelf, weak internal reserve replacement metrics, and elevated cost structure. In addition, the ratings are based on EPL's position as an exploration and production company operating in the Gulf of Mexico and in a highly cyclical, capital-intensive, and competitive industry. Our ratings on EPL also reflect the company's high proportion of oil production (approximately 64% pro forma for its recently announced acquisition), and its "adequate" liquidity. RELATED CRITERIA AND RESEARCH -- Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012 -- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011 -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 RATINGS LIST EPL Oil & Gas Inc. Corporate credit rating B/Stable/-- $460 mil 8.25% sr unsecd notes due 2018 B- Recovery rating 5 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
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