S&P: Extraction Oil notes B-

S&P said it assigned a B- corporate credit rating to Extraction Oil & Gas Holdings LLC, along with a B- rating to its proposed $500 million senior unsecured notes and 4 recovery rating, indicating 30% to 50% expected default recovery.

The outlook is stable.

The company will use the proposed unsecured notes to refinance its existing $430 million senior secured loans, S&P said, and repay outstanding borrowings under its revolving credit facility.

The ratings reflect the company's vulnerable business risk profile as a small and narrowly focused company with a limited track record and a high proportion of proved undeveloped reserves, the agency said, as well as an aggressive financial risk profile as a primarily financial sponsor-owned entity.

The company's reserves and production are concentrated in the Wattenberg field and this limited diversity leaves the company exposed to regional risks, including regulatory risk and potential infrastructure capacity constraints, S&P explained.

Partly offsetting these factors are the company's low breakeven costs and high proportion of liquids, the agency said.

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