S&P rates Oasis Petroleum B, notes B+

S&P said it Oasis Petroleum Inc. a B issuer rating and a B+ with a 2 recovery rating to its planned $400 million of senior unsecured notes. The 2 recovery rating indicates an expectation of substantial (70%-90%, rounded estimate: 85% capped) recovery of principal in default.

“The rating on OAS reflects our evaluation of its credit risk following its previously announced acquisition of certain Williston Basin assets from Diamondback Energy for up to $745 million, which will ultimately be funded by $400 million of new unsecured notes and proceeds from OAS' $406 million divestiture of its exploration and production (E&P) assets in the Permian Basin. The new notes will help refinance a second-lien bridge facility before the purchase transaction closing in July,” S&P said in a press release.

The outlook is stable, reflecting an expectation OAS will maintain moderate capital spending to modestly increase production while generating substantial free operating cash flow, which the agency said it expects will be used primarily for shareholder returns.

“We expect FFO to debt to average above 50% over the next 12-24 months, with debt to EBITDA of 1.5x-1.75x including S&P adjustments,” the agency said.

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