S&P rates Earthstone notes B+

S&P said it assigned B+ issue-level and 2 recovery ratings to Earthstone Energy Inc.’s planned $500 million of senior unsecured notes.

Concurrently, S&P placed Earthstone’s B issuer and B+ issue-level rating on its outstanding senior unsecured notes on CreditWatch with positive implications.

Earthstone plans to use the proceeds to help fund its acquisition of Novo Oil & Gas Holdings LLC. The deal is expected to close in the third quarter of 2023.

“The CreditWatch placement reflects our expectation that Earthstone will maintain production of more than 120,000 barrels of oil equivalent per day (boe/d) over the next 12 months while generating free cash flow, which we expect the company to use to reduce borrowings on its credit facility while maintaining funds from operations (FFO) to debt above 60%,” S&P said in a press release.

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