S&P rates Magnolia Oil B+, notes BB-

S&P said it assigned its B+ corporate credit rating to TPG Pace Energy Holdings Corp., which will be renamed Magnolia Oil & Gas Corp.

At the same time, the agency assigned its BB- issue-level rating to the proposed $400 million senior notes due 2026. The recovery rating is 2, indicating an expectation of substantial (70% to 90%; rounded estimate: 85%) recovery in the event of a payment default.

S&P said the rating reflects the company's participation in the cyclical and capital-intensive oil and gas exploration and production industry, its relatively small proved developed reserve base, modest production level, lack of geographic diversity and lack of operating track record with these assets.

These factors are offset by the company's concentration in an oil-weighted basin and above average profitability, currently very low leverage and substantial expected free operating cash flow generation.

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