Moody's downgrades Energen to junk

Moody's Investors Service said it downgraded Energen Corp.'s senior debt to Ba1 (LGD4, 52%) from Baa3 and assigned a Ba1 corporate family rating and a Ba1-PD probability of default rating to the company. The outlook is negative.

Alabama Gas Corp.'s A2 senior debt rating was placed under review, direction uncertain. Energen has agreed to sell Alabama Gas to Laclede Group Inc. (Baa1/negative).

The agency said that without Alabama Gas, Energen's scale, as measured by reserves and production, more closely resembles a Ba2 company. In addition, the downgrade reflects Moody's concern that the weak capital efficiency reported for 2013 will continue into 2014 and beyond, hindering Energen's ability to build scale.

More positively, Energen's plan to use the sale proceeds to reduce leverage will offset the negative impact of the loss of Alabama Gas' stable cash flow, Moody's said.

As for Alabama Gas, the agency said it will likely affirm or possibly upgrade its ratings if the sale is completed as planned due to the relative strength of the new owner. If the sale is not completed, Moody's may downgrade the ratings, reflecting the downgrade of Energen.

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