S&P may cut Stone Energy, Comstock notes

Standard & Poor's said it affirmed the B+ corporate credit rating on Stone Energy Corp. and the BB- corporate credit rating on Comstock Resources Inc.

The outlook is stable.

The agency said it placed on CreditWatch with negative implications Stone's B+/3RR subordinated notes rating and Comstock's B+/5RR senior unsecured notes rating.

The actions follow the announcement that Stone entered a definitive agreement to acquire Bois d'Arc Energy Inc. (unrated), in which Comstock holds a 49% ownership interest.

The affirmation of Stone's corporate credit rating reflects S&P's view that organic cash flow prospects for the combined entity should allow Stone to materially reduce debt after funding the deal, the agency said.

The affirmation of Comstock's corporate credit rating reflects the agency's view that the loss of ownership interests in Bois d'Arc will not materially impair the company's credit profile at the BB- rating, S&P said.

On a pro forma cash flow basis, the agency said it believes leverage will be in line with expectations for current ratings, at close to 1 times debt to EBITDAX.

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