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Rating Action:

Moody's assigns Ba1 rating to QEP Resources notes

11 Aug 2010

Approximately $1.1 billion of rated debt affected

New York, August 11, 2010 -- Moody's Investors Service assigned a Ba1 rating to QEP Resources, Inc.'s (QEP) proposed offering of $500 million of senior unsecured notes due 2021. Moody's raised QEP's Speculative Grade Liquidity Rating to SGL-2 from SGL-3 and affirmed QEP's Ba1 Corporate Family Rating (CFR) and Ba1 ratings on its existing senior unsecured notes. The outlook is stable.

"This debt offering effectively refinances the notes that were tendered to QEP in its recently completed change of control offer," commented Pete Speer, Moody's Vice-President. "This transaction solidifies the company's liquidity by repaying the 364-day term loan used to temporarily fund the change of control offer."

The SGL-2 rating is based on our expectation that QEP will have good liquidity over the next twelve months. The company has a $1 billion committed unsecured revolving credit facility that matures in March 2013 that has $278 million of outstanding borrowings as of August 11, 2010. Pursuant to the change of control provisions in the existing senior notes indentures, QEP offered to redeem the notes. Approximately $618 million were tendered in August 2010 and funded with a combination of revolver borrowings and a $500 senior unsecured term loan. The senior unsecured notes offering will refinance the term loan on a long-term basis, leaving ample revolver capacity for forecasted negative free cash flow and working capital funding needs.

QEP forecasts negative free cash flow over the second half of 2010 and first half of 2011. The company has substantial hedging in place to reduce its exposure to commodity prices and has some flexibility in its capital spending. The outlook is stable based on the company achieving its production growth forecasts and delivering sufficient reserve additions to maintain its leverage metrics on proved developed reserves and production volumes. If QEP's capital productivity is weaker than expected or if the company makes significant acquisitions without meaningful equity funding the outlook could be changed to negative or the ratings downgraded.

QEP's Ba1 Corporate Family Rating (CFR) is supported by its long-term track record of growing production and reserves at competitive costs and leverage metrics that compare favorably to most Ba1 and Ba2 rated peers. The rating is restrained by QEP's relatively small reserve and production scale in comparison to its peer group and its significant concentration of reserves and production in the Pinedale Anticline in western Wyoming and the Haynesville Shale in northwest Louisiana. The Ba1 rating also recognizes the significant third party cash flows generated by QEP Field Services that provide additional debt support.

The Ba1 rating for QEP's senior notes reflects both the overall probability of default for QEP, to which Moody's assigns a Probability of Default Rating (PDR) of Ba1, and a loss given default of LGD 4 (60%). The QEP senior notes and revolving credit facilities are all unsecured and have no subsidiary guarantees. Therefore the senior notes are rated the same as QEP's Ba1 CFR under Moody's Loss Given Default Methodology.

The last rating action on QMR was on July 2, 2010 when the company's ratings were downgraded to Ba1 from Baa3 following the company's spin-off from Questar Corporation.

The principal methodology used in rating QEP was Moody's Global Independent Exploration and Production Rating Methodology, published in December 2008 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research and Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

QEP Resources, Inc. is an independent exploration and production company headquartered in Denver, Colorado; and a successor by merger to Questar Market Resources, Inc.

New York
Peter Speer
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Steven Wood
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's assigns Ba1 rating to QEP Resources notes
No Related Data.
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