Moody’s gives Ba2 to Murphy Oil notes

Moody's Investors Service said it assigned a Ba2 rating to Murphy Oil USA, Inc.'s proposed $300 million senior unsecured note issuance.

The company's Ba1 corporate family rating is unchanged as well as other ratings, including the Ba1-PD probability of default rating, the Ba2 rating on its existing senior unsecured notes due 2023 and its speculative grade liquidity rating of SGL-1.

The outlook stable.

Terms of the proposed $300 million 10-year unsecured note issuance are expected to be similar to the company's existing senior unsecured notes.

Murphy Oil is expected to use about $50 million to fund mandatory amortization on its term loan, which had $180 million outstanding as of Dec. 31, 2016. The company also had $177 million remaining under a $500 million share repurchase program as of Dec. 31, 2016.

"Despite weaker than expected earnings in the first quarter which caused the company to lower its full year 2017 guidance, Moody's expects the transaction will result in pro forma leverage of about 2.5x – up from 1.9x at the end of 2016 – which is well within our stated trigger for a downgrade of above 3.5x," Moody’s assistant vice president, analyst Peter Trombetta said in a news release.

Similar to other fuel retailers, the agency said Murphy Oil experienced weak fuel volumes and margins in the first quarter of 2017 due in part to lower demand and higher inventory levels.

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