S&P rates Double Eagle III B-, notes B

S&P said it assigned a B- issuer rating to Double Eagle III Midco 1 LLC and a B rating with a 2 recovery rating to its planned offering of $650 million senior unsecured notes. The 2 recovery rating indicates an expectation for substantial (70%-90%; rounded estimate: 85%) recovery of principal in a default.

“The rating on Double Eagle reflects its relatively small proved reserves base and production level, its high percentage of proved undeveloped reserves (69% of proved as of June 30, 2020), its lack of geographic diversification, and large cash flow outspend,” S&P said in a press release.

Most of the proceeds will be used to repay Double Eagle’s second-lien term loan and pay down the balance on its reserve-based lending credit facility.

The outlook is stable.

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