Research Update: Hilcorp Energy I L.P. Upgraded To 'BB+' On Debt Paydown And Asset Consolidation; Outlook Stable

U.S.-based privately-held oil and gas exploration and production company Hilcorp Energy I L.P. announced the consolidation of its restricted and unrestricted subsidiaries as well as an offering of $800 million in senior unsecured notes to refinance the BP term loan. We expect these factors and the company's priority of using free cash flow for debt paydown to greatly improve cash flow and leverage metrics. As a result, we raised our issuer credit rating to 'BB+' from 'BB'. At the same time, we raised our 'BB' issue-level rating on the company's senior unsecured notes to 'BB+'. The '3' recovery rating is unchanged. We assigned our 'BB+' issue-level rating and '3' recovery rating to Hilcorp Energy I LP and Hilcorp Finance Company's

...- U.S.-based privately-held oil and gas exploration and production company Hilcorp Energy I L.P. announced the consolidation of its restricted and unrestricted subsidiaries as well as an offering of $800 million in senior unsecured notes to refinance the BP term loan. - We expect these factors and the company's priority of using free cash flow for debt paydown to greatly improve cash flow and leverage metrics. - As a result, we raised our issuer credit rating to '##+' from '##'. At the same time, we raised our '##' issue-level rating on the company's senior unsecured notes to '##+'. The '3' recovery rating is unchanged. - We assigned our '##+' issue-level rating and '3' recovery rating to Hilcorp Energy I LP and Hilcorp Finance Company's new senior unsecured notes due 2030 and 2032. - The stable outlook reflects our view that funds from operations (FFO) to debt will rise above 45% while debt to EBITDA declines below 2x on a consolidated basis for the next two years....

Research Update