S&P cuts Wiser Oil

Standard & Poor's said it lowered the corporate credit ratings on Wiser Oil Co. to B- from B following a review of recent financial and business results. The subordinated debt rating was lowered to CCC from CCC+.

The outlook remains negative.

S&P said the negative rating action reflects the failure by Wiser to stem the erosion of its reserves, adequately improve its cost structure, and improve liquidity despite record hydrocarbon prices. The problems posed by its aggressive debt leverage and high cost structure are exemplified by the announcement in its recent 10-Q filing that Wiser does not currently meet the working-capital covenant in its credit facility (expected to be repaired in an allotted 30-day grace period) despite record crude oil and natural gas prices during the first quarter.

Although production levels have risen in first-quarter 2004, Wiser's very aggressive capital-expenditure program has so far failed to yield improved reserve growth and has precluded improvements to liquidity. At roughly $5.40 per billion cubic feet equivalent, Wiser's very high cost structure limits profitability and could lead to impaired cash flow and earnings should hydrocarbon prices retreat from their current record levels.

S&P said the ratings on Wiser reflect the company's position in the very volatile oil and natural gas exploration and production industry, limited liquidity, high operating costs, shrinking reserves and reserve life, and significant financial leverage.

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