Moody’s rates Diamondback Energy notes B1

Moody's Investors Service said it assigned a B1 rating to Diamondback Energy, Inc.'s proposed offering of $250 million senior unsecured notes due 2025.

Diamondback's other ratings and stable outlook remained unchanged.

Proceeds will be used to fund the $1.62 billion cash portion of Diamondback's $2.43 billion Delaware Basin acquisition of Brigham Resources Operating, LLC and Brigham Resources Midstream, LLC (unrated) that was announced on Dec. 14.

The company concurrently launched a primary market equity offering for 10.5 million shares and raised $1.02 billion of gross proceeds on Dec. 14 and could raise another $150 million if the underwriters' option is exercised within the next 30 days.

"The Brigham acquisition is the second major transaction that Diamondback has executed in the southern Delaware Basin in 2016, which will substantially increase the company's drilling inventory, accelerate growth, enhance diversification within the Permian Basin and potentially improve margins and returns upon successful development of these asset,” Moody's senior analyst Sajjad Alam said in a news release.

"However, Diamondback will have to dedicate a substantial amount of capital and add incremental midstream infrastructure over the next few years in these largely undeveloped acreage to establish production and reserves. Additionally the latest acquisition is slightly leveraging.

“Consequently, Moody's views the current Ba3 corporate family rating (CFR) and stable outlook appropriately reflects Diamondback's business prospects and credit risks," Alam added in the release

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