Moody's: Aurora notes Caa1

Moody's Investors Service said it assigned a Caa1 (LGD 4, 61%) rating to Aurora USA Oil & Gas, Inc.'s proposed $250 million senior unsecured notes due 2020.

The proceeds will be used to fund its recent acreage acquisition in the Eagle Ford shale and associated capital expenditure requirements.

The outlook is stable.

The full working interest acquired in the acreage adjacent to Aurora's non-operated acreage will give it the opportunity to operate the new acreage independent of Marathon Oil, Moody's said, while increasing the proved reserves by 10%.

However, the absolute debt goes from $395 million to $645 million with this acquisition on a pro forma basis, the agency said.

The company has a corporate family rating of B3, probability of default rating of B3-PD and a Caa1 (LGD 4, 61%) rating on its $365 million senior unsecured notes due 2017.

The rating on the notes reflects both the overall probability of default and the size of the senior secured revolver's priority claim relative to the senior unsecured notes, Moody's said.

The ratings are supported by Aurora's strong full cycle metrics, leverage that is expected to decline during 2013 and the strong operational track record of Marathon Oil, which is the operator of all of Aurora's current wells, the agency said.

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