Rating Action:
Moody's reviews 29 US E&P companies for downgrade
Global Credit Research - 16 Dec 2015
New York, December 16, 2015 -- Moody's Investors Service (Moody's) placed the ratings of 29 US exploration and production (E&P) companies and their rated subsidiaries on review for downgrade. A complete set of companies and rating actions is listed below.
"Industry conditions have weakened further with oil and natural gas prices at multi-year lows," said Pete Speer, Moody's Senior Vice President. "E&P companies will be stressed for a longer period with much lower cash flows, difficulty selling assets and limited capital markets access."
RATINGS RATIONALE
As part of an ongoing assessment of energy markets, Moody's sharply reduced its oil and gas price assumptions on December 15 in light of continuing oversupply in both the global oil markets and the United States natural gas market. Throughout 2015, E&P has accounted for the majority of Moody's rating actions and downgrades consistent with deteriorating liquidity and heightened default risk.
Although most of the companies being put on review have not had a negative rating action during the current slide of oil and gas prices, today's review for downgrade reflects much weaker industry fundamentals resulting in downward rating pressure. While this review focuses on investment grade and Ba-rated companies, Moody's continues its assessment of single-B and lower rated companies.
This broad ratings review will focus on each individual E&P company's asset base, portfolio durability, cost structure and returns, as well as management's strategy for coping with a prolonged downturn. The review will assess each company's cash flow and credit metrics under our latest price assumptions, liquidity profile, commodity hedges in place, debt maturity profile and financing needs, capital spending requirements, and relative rating positioning.
Moody's expects weaker industry conditions through at least 2017, as lower prices lead to weaker cash flows, a challenging asset sales environment and restricted access to capital markets. Low oil and natural gas prices will reduce companies' cash flows and further weaken their credit metrics. Asset sales are much more difficult to transact in this environment and the values of these assets are much lower. Capital markets access, both debt and equity, is limited for energy companies, heightening refinancing risk, particularly for speculative-grade rated companies.
Based on the severity and potential duration of the industry challenges, Moody's expects that many companies will be downgraded a notch and some companies could be downgraded more than one notch. However, some companies' ratings could be confirmed as well. Moody's expects to conclude most reviews over the next several months.
The principal methodology used in these ratings was Global Independent Exploration and Production Industry published in December 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
The following ratings are placed on Review for Downgrade:
..Issuer: Anadarko Finance Company
....Backed Senior Unsecured Regular Bond/Debenture, Baa2, Placed on Review for Downgrade
..Issuer: Anadarko Petroleum Corporation
....Senior Unsecured Shelf, (P)Baa2, Placed on Review for Downgrade
....Senior Unsecured Commercial Paper, P-2, Placed on Review for Downgrade
....Senior Unsecured Regular Bond/Debenture, Baa2, Placed on Review for Downgrade
..Issuer: Antero Resources Corporation
.... Corporate Family Rating, Ba2, Placed on Review for Downgrade
.... Probability of Default Rating, Ba2-PD, Placed on Review for Downgrade
....Senior Unsecured Regular Bond/Debenture, Ba3 (LGD5), Placed on Review for Downgrade
..Issuer: Antero Resources Finance Corporation (Assumed by Antero Resources Corporation)
....Senior Unsecured Regular Bond/Debenture, Ba3 (LGD5), Placed on Review for Downgrade
..Issuer: Apache Corporation
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