Recipient email addresses will not be used in mailing lists or redistributed.
Use semicolon to separate each address, limit to 20 addresses.
characters you see
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
Don't want to see this again?
Accept our to continue to Moodys.com:
AND SCROLL DOWN!
By clicking “I AGREE” [at the end of this document],
you indicate that you understand and intend these terms and conditions to be
the legal equivalent of a signed, written contract and equally binding, and
that you accept such terms and conditions as a condition of viewing any and all
Moody’s information that becomes accessible to you [after clicking “I AGREE”] (the
“Information”). References herein to “Moody’s” include Moody’s
Corporation, Inc. and each of its subsidiaries and affiliates.
Terms of One-Time Website Use
you have entered into an express written contract with Moody’s to the contrary,
you agree that you have no right to use the Information in a commercial or
public setting and no right to copy it, save it, print it, sell it, or publish
or distribute any portion of it in any form.
acknowledge and agree that Moody’s credit ratings: (i) are current opinions of
the future relative creditworthiness of securities and address no other risk; and
(ii) are not statements of current
or historical fact or recommendations to purchase, hold or sell particular
securities. Moody’s credit ratings and
publications are not intended for retail investors, and it would be reckless
and inappropriate for retail investors to use Moody’s credit ratings and
publications when making an investment decision. No
warranty, express or implied, as the accuracy, timeliness, completeness,
merchantability or fitness for any particular purpose of any Moody’s credit
rating is given or made by Moody’s in any form whatsoever.
3. To the extent permitted by law, Moody’s and its directors,
officers, employees, representatives, licensors and suppliers disclaim
liability for: (i) any indirect, special, consequential, or incidental losses
or damages whatsoever arising from or in connection with use of the
Information; and (ii) any direct or compensatory damages caused to any person
or entity, including but not limited to by any negligence (but excluding fraud
or any other type of liability that by law cannot be excluded) on the part of
Moody’s or any of its directors, officers, employees, agents, representatives,
licensors or suppliers, arising from or in connection with use of the
4. You agree to read [and
be bound by] the more detailed disclosures regarding Moody’s ratings and the
limitations of Moody’s liability included in the Information.
5. You agree that any disputes relating to this agreement or your use of
the Information, whether sounding in contract, tort, statute or otherwise,
shall be governed by the laws of the State of New York and shall be subject to
the exclusive jurisdiction of the courts of the State of New York located in
the City and County of New York, Borough of Manhattan.
10 Aug 2009
Approximately $2 billion of debt affected
New York, August 10, 2009 -- Moody's Investors Service affirmed Plains Exploration and Production's
(PXP) ratings and retained a negative rating outlook. PXP's ratings
include a Ba3 Corporate Family Rating, Ba3 Probability of Default
Rating, and B1 senior unsecured note ratings (LGD 4; 65%
from LGD 4; 67%).
This action follows PXP's announced $1.1 billion buyout
of carried interest future capital spending commitments in the Haynesville
Shale drilling and development joint venture with Chesapeake Energy;
its associated funding plan including raising approximately $400
million equity; second quarter results; and a review of PXP's
business and funding plans for the remainder of 2009 and 2010.
The negative outlook reflects the ratings' dependence on substantial
improvement in underlying reserve replacement costs, delivery of
sound production growth going into 2010 commensurate with capital spending,
stronger oil prices, and leverage reduction. We believe 2009
finding and development costs will be very high due to the cost of the
Chesapeake carried interest during 2009 and then prepaying $1.1
billion of the remaining burden later this year. After netting
out such costs to estimate underlying conditions heading into 2010,
normalized reserve replacement costs will need to be competitive.
However, while the Haynesville buyout plan adds to already high
leverage it reduces bondholders' risk by adding a degree of flexibility
to the 2010 through 2012 capital program by reducing mandatory spending
as well as decreasing the amount by which PXP was destined to overspend
cash flow. In effect, instead of funding a $1.25
billion estimated remaining carried interest from uncertain cash flow,
PXP is pre-funding the obligation with approximately $400
million of equity, a $150 million discount off the original
cost, balance sheet cash, and borrowings, which is more
favorable to bondholders Henceforth, PXP will fund only its own
direct costs within the JV.
The ratings are further supported by seasoned management; scale still
compatible with the ratings; sound liquidity and covenant clearance;
a long-lived base of California reserves needing low levels of
capital spending to sustain production; a so far promising large
Haynesville acreage position; and potentially sizable asset monetization,
including potential Gulf of Mexico discoveries and prospects. Key
support for the ratings also comes from price protection in the form of
2009 puts on 32,500 barrels/day at $55/barrel and 2010 puts
at $55/barrel ($50 after a $5/barrel deferred premium)
on 40,000 barrels/day of oil production as well as 2009 collars
on 150,000 MMBtu of natural gas production with a $10 floor
and 2010 three-way collars on 85,000 MMBtu with a $6.12
floor and $4.64 limit.
After a series of proportionately large asset dispositions, joint
venture investments, deep horizon and deepwater Gulf of Mexico exploration
and development front end costs, hedge monetizations, and
debt and equity offerings; PXP carries substantial leverage in advance
of receiving commensurate production and cash flow back on its capital
outlays. While PXP transformed to a continuing core reliance on
its stalwart California oil reserves, its promising Haynesville
natural gas play, and its high impact high risk deep horizon and
deep water Gulf of Mexico properties, the price outlook is highly
uncertain and the degree of commensurate production response remains an
Important determinants of PXP's outlook and ratings will be whether
PXP substantially reduces its 2009 reserve replacement costs, the
quality of the underlying components of those metrics, and production
momentum going into 2010. PXP posted very weak drillbit reserve
replacement rates, and unsustainably high replacement costs during
2008. Though this was mostly due to major negative oil price-related
reserve revisions at year-end 2008 and the $1.65
billion front-end outlay for the Haynesville JV, net of those
factors drillbit replacement costs were still high, in the range
Sequential quarter to quarter production during 2009 has been fairly flat
in spite of heavy capital spending and was achieved with Haynesville and
Flatrock production growth sufficient to offset natural declines elsewhere.
While this trend is largely due to the heavy front-end nature of
the Gulf of Mexico spending and the unproductive substantial outlays in
the Haynesville for Chesapeake's carried interest, PXP's
ability to retain its debt ratings requires 2010 production growth commensurate
with its capital outlays. While leverage will rise with PXP's
buyout of the Chesapeake carried interest, future cash flow will
be freed from funding the heavy carried interest burden and instead target
Leverage on proven developed reserves (PD) and on production is high for
the ratings, reflecting the 2008 front-end cost of buying
into 50% of 20% of Chesapeake's Haynesville acreage,
the related carried interest costs, and heavy Gulf of Mexico capital
outlays, and will need to decline during 2010. PXP's
pro-forma leverage (as adjusted per Moody's) on PD reserves
and production approximate $12/Boe and $30,900/Boe,
respectively. It is also high on total proven reserves at just
over $14/boe (Moody's combines FAS 69 development capital
spending with debt). Leverage on reported year-end 2009
reserves could decline if higher oil prices remain significantly above
the year-end 2008 levels used to set the economic threshold of
Moody's last rating action for PXP was on March 3, 2009, at
which time we assigned a B1 rating to its $500 million pending
note offering, affirmed its Ba3 Corporate Family Rating, Ba3
Probability of Default Rating, and B1 senior unsecured note ratings.
The principal methodology used in rating PXP is the Global Exploration
and Production (E&P) rating methodology which can be found at www.moodys.com
in the Credit Policy & Methodologies directory, in the Ratings
Methodologies subdirectory. Other methodologies and factors that
may have been considered in the process of rating PXP can also be found
in the Credit Policy & Methodologies directory.
Plains Exploration & Production Company is headquartered in Houston,
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's continues Plains Exploration's negative outlook, affirms ratings
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.
Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com
under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.