The ratings on Hilcorp Energy I L.P. reflect a weak business risk profile and aggressive financial leverage. Hilcorp is a small, privately held limited partnership that acquires, develops, and produces crude oil and natural gas, mainly from onshore Texas and South Louisiana properties. The company's business risk profile incorporates the highly competitive, cyclical, and capital-intensive nature of the oil and gas exploration and production industry. Hilcorp pursues a strategy of acquiring properties and then augmenting production through workovers and downhole surface facility enhancement, which requires extensive engineering expertise. Historically, low prices for partially depleted reserves offset the high costs associated with augmenting the properties. Recent increases in acquisition prices and production costs have resulted in a cost structure that compares
