New York, September 17, 2020 -- Moody's Investors Service, ("Moody's") assigned
a Baa3 rating to Fieldwood Energy LLC (DIP)'s (Fieldwood) $100
million senior secured priming super-priority debtor-in-possession
(DIP) delayed draw term loan. On September 15, 2020,
the US Bankruptcy Court for the Southern District of Texas approved up
to $100 million of aggregate DIP loans.
The DIP facility was provided by certain pre-petition first lien
term loan lenders, which will help the company manage its operations
and liquidity needs during the Chapter 11 reorganization process.
The DIP facility has a final maturity date of August 4, 2021.
Fieldwood Energy LLC and its certain affiliates had filed a voluntary
petition for relief under Chapter 11 on August 4, 2020. Moody's
subsequently withdrew all ratings on the company.
Assignments:
.Issuer: Fieldwood Energy LLC (DIP)
...Senior Secured Super-Priority Term Loan,
Assigned Baa3
RATINGS RATIONALE
The Baa3 rating primarily reflects the high collateral coverage available
to the rated DIP facility and the small proportion of DIP financing relative
to Fieldwood's pre-petition debt amount. The rating
also reflects the structural features of the DIP facility, the cause
of the bankruptcy filing, and the nature and scope of the reorganization.
The DIP facility has a super-priority administrative claim and
is secured on a super-senior basis by substantially all properties
of Fieldwood, including its oil & gas reserves. Moody's
estimates total collateral coverage of the DIP facility is at least 5x,
after taking the company's substantial plugging and abandonment
obligations into consideration. In addition, the ratio of
the DIP loan ($100 million) relative to pre-petition funded
debt ($1.8 billion) is relatively low at less than 6%
. Both of these factors are consistent with an A factor rating
under Moody's Debtor-in-Possession Lending methodology.
The Baa3 rating also reflects favorable structural features, including
the super-priority administrative status and super senior claim
to all property, upstream guarantees from all operating subsidiaries,
the nature of the DIP, which is entirely new money, and the
presence of a minimum liquidity covenant and a bi-weekly cash flow
budget variance report to measure operating performance. The structure
approved by the bankruptcy court and collateral package ensures that the
DIP term loan is fully repaid prior to Fieldwood exiting bankruptcy.
However, the method of repayment has not been finalized at this
point.
In assessing the cause of the bankruptcy filing and the nature and scope
of the reorganization, Moody's believes that the bankruptcy was
largely due to elevated debt levels relative to depressed earnings and
the high costs of operations in the US Gulf of Mexico. But a sharp
collapse in global oil prices in early-2020, weak liquidity,
limited hedge protection beyond mid-2020, and reduced access
to capital markets also contributed to the bankruptcy.
Moody's views the reorganization as somewhat complex, with multiple
classes of debt and large plugging & abandonment obligations,
including liabilities related to legacy shelf properties that Fieldwood
acquired from Apache Corporation (Ba1 negative).
The principal methodology used in this rating was Debtor-in-Possession
Lending published in June 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1108429.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Fieldwood Energy LLC is an oil and gas exploration and production company
headquartered in Houston, Texas.
This rating is assigned on a point-in-time basis and will
be withdrawn as soon as practicable, before which it is subject
to monitoring.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure
This rating is solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Sajjad Alam
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Steven Wood
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
