Moody’s rates Lucid, loan B2

Moody's Investors Service said it assigned Lucid Energy Group II Borrower, LLC a B2 corporate family rating, B2-PD probability of default rating and a B2 senior secured term loan.

The outlook is positive.

Proceeds from the $900 million term loan, combined with equity contributions from the sponsors, will be used to fund the acquisition of Lucid expected to close in the first quarter of 2018.

"Lucid Energy's ratings reflect the company's initial small scale and its high leverage, which, to decline to a sustainable range, is dependent on a rapid increase in associated gas volumes in Eddy & Lea counties in New Mexico. The ratings benefit from the location of the company's assets in the northern Delaware Basin and the basin's expected growth in crude oil, and therefore associated gas, volumes," Moody's senior analyst Arvinder Saluja said in a news release.

"The positive outlook reflects producer drilling activity in the acreage dedicated to Lucid and the expected improvement in leverage metrics should that level of activity continue."

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