Moody's rates Kodiak notes B3

Moody's Investors Service said it assigned a B3 (LGD5, 73%) rating to Kodiak Oil & Gas Corp.'s senior notes due 2022. The outlook is stable.

Proceeds will be used to repay a portion of the borrowings outstanding under Kodiak's first-lien credit agreement, which has been expanded to accommodate the funding of a $660 million acquisition of additional properties in the Williston Basin.

The agency said that while the acquisition will further propel production upside, the all-debt financing of these acquired properties at a cost per flowing barrel in excess of $100,000 perpetuates a level of debt leverage that is high for the company's rating.

Kodiak's B2 corporate family rating reflects its emergence as a rapidly growing, moderately sized oil producer in the prolific Bakken Shale, its high-quality asset base extensively weighted to crude oil and the generous cash margins that its oil production enjoys, Moody's said.

The rating is restrained by Kodiak's high debt leverage, which at March 31 exceeded $75,000 per BOE of average daily production, pro forma for the acquisition, the agency said.

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