Moody's lowers Gavilan view to negative

Moody's Investors Service said it changed the outlook on Gavilan Resources, LLC to negative from stable.

The agency also said it affirmed Gavilan's B3 corporate family rating, B3-PD probability of default rating and Caa1 (LGD 5) senior secured second-lien term loan rating.

Moody's also said it withdrew Gavilan's SGL-3 liquidity rating.

Gavilan maintains a well equitized balance sheet and has adequate liquidity to fund operations, the agency said.

But it is a non-operating working interest owner in Eagle Ford Shale assets operated by Sanchez Energy Corp., which has a pace of development constrained by Sanchez's stressed financial condition, Moody's said.

The ratings also reflect the company's small scale, narrow geographic focus and non-operator status, the agency said.

The ratings are supported by Gavilan's well equitized capital structure, strong hedge portfolio and ownership by a sophisticated and well capitalized private equity sponsor with a strong track record in Blackstone Energy Partners, Moody's said.

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