Moody’s acts on 11 U.S. E&P companies

Moody's Investors Service said it concluded rating reviews on 11 Ba-rated U.S. exploration and production (E&P) companies.

The agency downgraded the following:

• SM Energy Co.: corporate family rating to B2 from Ba1 and senior unsecured debt to B3 (LGD4) from Ba2 (LGD5);

• Newfield Exploration Co.: corporate family rating to Ba3 from Ba1 and senior unsecured debt to Ba3 (LGD3) from Ba1 (LGD4);

• Range Resources Corp.: corporate family rating to Ba3 from Ba1, senior subordinated debt to B1 (LGD5) from Ba2 (LGD5) and senior unsecured debt to Ba3 (LGD3) from Ba1 (LGD 3);

• QEP Resources, Inc.: corporate family rating to B1 from Ba1 and senior unsecured debt to B1 (LGD4) from Ba1 (LGD4);

• WPX Energy, Inc.: corporate family rating to B2 from Ba1 and senior unsecured debt to B2 (LGD4) from Ba1 (LGD4);

• Energen Corp.: corporate family rating to B1 from Ba1, senior unsecured medium-term note program, to provisional B3 from provisional Ba2 and senior unsecured debt to B3 (LGD5) from Ba2 (LD5);

• Whiting Petroleum Corp.: corporate family rating to Caa1 from Ba2, senior subordinated debt to Caa3 (LGD6) from B1 (LGD6) and senior unsecured convertible bonds and senior unsecured bonds to Caa2 (LGD5) from Ba3 (LGD4); and

• Unit Corp.: corporate family rating to B2 from Ba3 and senior subordinated debt to B3 (LGD5) from B1 (LGD5).

Moody’s also confirmed the following corporate family ratings: Antero Resources Corp. at Ba2, Concho Resources Inc. at Ba1 and Hilcorp Energy I, LP at Ba1.

Oil prices have dropped substantially reflecting continuing oversupply in the global oil markets, very high inventory levels and additional Iranian oil exports coming on line, the agency said. Furthermore, North American natural gas and natural gas liquids prices remain quite weak.

Moody's lowered its oil price estimates on Jan. 21 and expects a slow recovery for oil prices over the next several years. For E&P companies, cash flow declines in tandem with oil and natural gas prices, with the decline weakening credit metrics and liquidity, and increasing their negative free cash flow.

The drop in energy prices and corresponding capital markets concerns will also raise financing costs and increase refinancing risks for E&P companies.

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