Moody's rates Plains Exploration notes Ba3

Moody's Investors Service said it affirmed Plains Exploration & Production's Ba2 corporate family rating and assigned a Ba3 rating to its pending $300 million of 10-year senior unsecured notes. Proceeds will repay the majority of $275.2 million of first secured revolver debt.

The outlook is changed from stable to negative.

The ratings are supported by the company's production and proven reserve scale, durable production base and focused core California holdings, Moody's said. They also reflect modest current leverage from which to fund negative cash flow after capital spending and potential stock buybacks and talented management with prior experience in managing heavy front-end offshore capital programs.

The ratings remain constrained by a proportionately low PD reserve base, relatively modest up-cycle margins associated with the company's secondary and tertiary recovery production and escalated California production costs, the agency said. They also are constrained by high finding and development cost, a need to clearly establish more attractive organic trends and expected higher leverage, Moody's added.

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