Moody's upgrades Hilcorp

Moody's Investors Service said it upgraded Hilcorp Energy I, LP's corporate family rating to B1 from B2 and its senior unsecured notes to B2 (LGD4, 66%) from B3 (LGD5, 77%).

The outlook is stable.

The agency said the upgrade reflects Hilcorp's strong production growth trends from investments, comparatively stable production, a long and generally productive history in most of its focus regions and an expected continued reduction in financial leverage.

The ratings are constrained by historically high leverage due to capital spending and acquisitions far in excess of retained cash flow after cash distributions to Hilcorp's owner, by the call on future cash flow of required future development costs now estimated to between $800 million and $900 million to bring the proven non-producing reserve component to production and by Moody's expectation that Hilcorp may remain acquisitive and would fund acquisitions with debt, the agency said.

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