Moody's reviews Whiting, Kodiak

Moody's Investors Service said it placed Whiting Petroleum Corp.'s Ba2 corporate family rating and Ba2-PD probability of default rating under review for possible upgrade, placed its Ba2 senior bonds and Ba3 senior subordinated bonds under review, direction uncertain, and affirmed its speculative grade liquidity rating at SGL-2.

At the same time, Moody's placed Kodiak Oil & Gas Corp.'s B2 corporate family rating, B2-PD probability of default rating and B3 senior bonds under review for possible upgrade and affirmed its speculative grade liquidity rating at SGL-3.

These rating actions were prompted by Whiting's announcement that it will acquire Kodiak in an all-stock transaction valued at $6 billion, inclusive of Kodiak's net debt of $2.2 billion.

"With the acquisition of Kodiak, Whiting will gain basin intensification in its already established position in the Williston Basin, with a larger production base and deeper drilling inventory, which should enable enhanced drilling and operating efficiencies," Gretchen French, a Moody's vice president, said in an agency news release.

"However, even with the benefit of the all-stock transaction, Whiting will need to demonstrate strong growth in production and cash flow in order to maintain credit ratios indicative of a higher rating given Kodiak's heavy debt levels."

The agency said the review, direction uncertain, of Whiting's senior notes and subordinated notes reflects uncertainty to Whiting's corporate family rating and ultimate capital structure when the Kodiak acquisition closes. If Whiting's corporate family rating is upgraded by one notch to Ba1, the notes’ ratings would likely remain unchanged because of the contemplated increase in the size of the company’s priority-claim secured revolver relative to the unsecured notes, Moody’s said. However, the agency said if Whiting's corporate family rating is confirmed at Ba2, the senior notes and subordinated notes would likely be downgraded to Ba3 and B1, respectively.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.