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TEXT-S&P: EPL Oil & Gas rating unchanged by added notes
October 15, 2012 / 4:40 PM / 5 years ago

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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