Moody's rates new XTO Energy notes Ba1

Moody's Investors Service said it assigned a Ba1 rating to XTO Energy's pending $400 million senior unsecured notes offering due 2014, confirmed a Ba1 senior implied rating, and upgraded the company's existing 7.5% and 6.25% senior unsecured notes to Ba1 from Ba2.

The outlook remains positive.

Moody's said rating support includes the very solid capital efficiency; strong 2002 and expected sound 2003 proven developed reserve growth; wide basin and property diversification; added basin intensification with the pending acquisition; a durable roughly nine-year year proven developed reserve life; and acceptable but significant pro forma lease adjusted debt/proven developed reserves for the ratings.

Ratings restraints include moderate expected fourth-quarter 2003 organic production growth; full leverage; organic growth driven principally by one region (East Texas); still modest size; re-leveraging and acquisition due diligence risk from ongoing acquisitions; the high cost of XTO's 2003 and 2004 acquisitions (particularly per the trend in price paid per daily unit of production); and inherent depleting asset and cyclical price risk.

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