Moody’s revises Alta Mesa to negative

Moody's Investors Service sad it changed Alta Mesa Holdings, LP's outlook to negative.

At the same time, the agency affirmed Alta Mesa's B2 corporate family rating, B2-PD probability of default rating, B3 senior unsecured note rating and SGL-3 speculative grade liquidity rating.

"Despite significant capital spending and considerable growth in liquids production since 2011, Alta Mesa has not achieved the scale or the level of cash flow that are comparable to other B2 rated E&P companies," Moody's analyst Sajjad Alam said in a news release.

"On the contrary, heavy outspending over the past several years has pushed leverage higher and the company has struggled to maintain production and reserves. Overall production declined to 15,000 barrel of oil equivalent (boe) per day (pro forma for the Eagle Ford asset sale) in 2013 from 19,000 boe per day in 2011 with reserves declining 9% during that same period.”

“Additionally, while the sale of certain oily Eagle Ford assets in early 2014 will temporarily improve liquidity and leverage, margins and cash flows will shrink and Alta Mesa will face higher execution risk as it shifts capital to the technologically challenging salt dome reservoirs in Louisiana and mature and less prolific fields in Oklahoma," Alam added in the release.

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