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Rating Action:

Moody's assigns Baa3 rating to St. John the Baptist Parish's Revenue Refunding Bonds Sub-series 2017A-1, 2017A-2 and 2017A-3 (Marathon Oil Project)

04 Sep 2019

$600 million of debt rated

New York, September 04, 2019 -- Moody's Investors Service (Moody's) assigned a Baa3 rating to Marathon Oil Corporation's (Marathon Oil) proposed remarketing of certain bonds issued by the Parish of St. John the Baptist, State of Louisiana (Parish), including $200 million Revenue Refunding Bonds Sub-series 2017A-1 (Sub-series A-1 bonds), $200 million Revenue Refunding Bonds Sub-series 2017A-2 (Sub-series A-2 bonds) and $200 million Revenue Refunding Bonds Sub-series 2017A-3 (Sub-series A-3 bonds, and together with Sub-series A-1 bonds and Sub-series A-2 bonds, Sub-series A bonds). Marathon Oil's ratings and stable outlook are unchanged.

On December 18, 2017, the Parish issued $1 billion of 3.75% Revenue Refunding Bonds (Marathon Oil Project) Series 2017 (Series 2017 bonds), which Marathon Oil purchased on their date of issuance to hold for its own account and potential remarketing to the public at a future date. The Series 2017 bonds are special and limited obligations of the Parish, the principal of and the interest on, and the purchase price of, which are all payable solely out of the payments derived from or in connection with a Refunding Agreement between the Parish and Marathon Oil. Marathon Oil is remarketing $600 million of these Series 2017 bonds as Sub-series A bonds in three tranches corresponding to different mandatory tenders for purchase dates. Marathon Oil will continue to be obligated to service the principal and interest associated with the Series 2017 bonds.

"Marathon Oil's remarketing utilizes its ability to remarket up to $1 billion of tax-exempt bonds prior to 2037," commented Amol Joshi, Moody's Vice President. "The company should benefit from such bonds' typically favorable interest rate."

Assignments:

..Issuer: St. John the Baptist (Parish of) LA

....Senior Unsecured Revenue Refunding Bonds, Assigned Baa3

RATINGS RATIONALE

The Sub-series A bonds are special and limited obligations of the Parish, the principal of and the interest on, and the purchase price of, which are all payable solely out of the payments derived from or in connection with the Refunding Agreement between the Parish and Marathon Oil. The Sub-series A bonds' Baa3 rating reflects Marathon Oil's obligations pursuant to the Refunding Agreement being its unsecured, unsubordinated obligations which will rank equally with all of its other existing and future unsecured and unsubordinated indebtedness. Marathon Oil's past debt reduction efforts included the redemption in 2017 by the Parish of $1 billion of 5.125% municipal revenue bonds due in 2037 in a refunding transaction using the proceeds of the Series 2017 bonds, which preserved Marathon Oil's ability to remarket up to $1 billion of tax-exempt municipal bonds prior to 2037. The proposed remarketing utilizes this ability to issue tax-exempt debt. Marathon Oil had $961 million of balance sheet cash at June 30, 2019. Additionally, the company had full availability under its $3.4 billion credit facility, which expires in May 2022.

Marathon Oil's Baa3 senior unsecured rating is supported by Moody's expectation of good cash flow based leverage metrics as the company invests in its four core US shale assets to grow production and reserves, while its international assets decline. Marathon Oil has a relatively high sensitivity to oil prices, and its cash margins, capital efficiency and leverage metrics should remain strong through 2020 with range-bound commodity prices. Marathon Oil is a large independent exploration and production company with a diversified production and reserve base. The company has re-positioned its portfolio through asset sales including its 2019 exit from the UK North Sea, its 2018 Libya exit and the 2017 sale of its Canadian oil sands mining subsidiary. The company is challenged by the increased capital intensity of its shale assets and a shorter proved developed reserve life. Moody's expects Marathon Oil to focus most of its near-term capital spending on its short-cycle resource plays in the Eagle Ford, Bakken, STACK/SCOOP and the Delaware Basin. As the company develops its less mature STACK/SCOOP and Delaware Basin assets while also potentially developing the Eagle Ford and Bakken outside its tier 1 acreage, Marathon Oil's capital efficiency could lag some of its other oil-weighted peers.

The rating outlook is stable reflecting Moody's expectation that Marathon Oil will modestly grow its production and reserves into 2020, while generating positive free cash flow and maintaining good liquidity.

The rating could be upgraded if Marathon Oil grows production and reserves at competitive returns with a leveraged full cycle ratio exceeding 2x, its debt to proved developed reserves falls below $6 per barrel of oil equivalent, retained cash flow (RCF) to debt is maintained above 50% and the company generates free cash flow while adjusting its share repurchases in line with actual results and cash flow. The rating could be downgraded if Marathon Oil's RCF/Debt falls below 25%, its capital efficiency deteriorates significantly, share repurchases increase significantly, or the company borrows to fund a sizeable acquisition causing debt to grow faster than cash flow.

The principal methodology used in these ratings was Independent Exploration and Production Industry published in May 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Marathon Oil is a large independent exploration and production company with a diversified asset base across four US core unconventional shale plays: the Eagle Ford, Bakken, Oklahoma Resource Basins and the Permian Basin, as well as international operations primarily in Equatorial Guinea.

REGULATORY DISCLOSURES

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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Amol Joshi, CFA
VP-Sr Credit Officer
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

No Related Data.
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