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Rating Action:

Moody's downgrades Samson's corporate family rating to Caa3

Global Credit Research - 02 Mar 2015

$3.25 billion of rated debt affected

New York, March 02, 2015 -- Moody's Investors Service (Moody's) downgraded Samson Investment Company's Corporate Family Rating (CFR) to Caa3 from B3. Moody's also downgraded the company's senior unsecured notes to Ca from Caa1 and its second-lien term loan to Caa2 from B2. The SGL-4 Speculative Grade Liquidity Rating is affirmed and the outlook is negative. These rating actions conclude Moody's review for downgrade of Samson Investment Company, which was initiated on December 12, 2014. Samson Investment Company is the principal operating subsidiary of Samson Resources Corporation (Samson).

"The downgrade to Caa3 reflects our view that Samson faces a high risk of default," commented Andrew Brooks, Moody's Vice President. "The company's stressed liquidity position, delays in reaching agreements on potential asset sales and its retention of restructuring advisors increases the possibility that the company may pursue a debt restructuring that Moody's would view as a default."

Downgrades:

Corporate Family Rating (Local Currency), Downgraded to Caa3 from B3

Probability of Default Rating, Downgraded to Caa3-PD from B3-PD

Senior Secured Bank Credit Facility, Downgraded to Caa2(LGD3) from B2(LGD3)

Senior Unsecured Regular Bond/Debenture, Downgraded to Ca(LGD5) from Caa1(LGD5)

Affirmations:

Speculative Grade Liquidity Rating, Affirmed SGL-4

Outlook Actions:

Changed To Negative From Rating Under Review

RATINGS RATIONALE

Chronically low natural gas prices exacerbated by suddenly weaker crude oil prices have pressured Samson's near term cash flow, stressing its liquidity and limiting opportunities for debt reduction. While the company has made modest progress furthering the development of its oil and liquids-rich natural gas holdings, this strategy presently does not generate cash flow sufficient to adequately fund its ongoing oil and gas production activities, requiring the company to shift its focus to asset sales to supplement its liquidity. However, the current commodity price environment has not been conducive for assets sales and this process appears to have now stalled. Samson is also burdened with exceptionally heavy debt service costs relative to cash flow as a result of its high coupon debt, further pressuring liquidity.

Samson has retained restructuring advisors to assist in the evaluation of all aspects of its capital structure and untenable interest burden. Moody's considers Samson's present debt level unsustainable, heightening the risk that Samson may need to reach a negotiated agreement to reduce its outstanding debt and interest expense, which Moody's would view as equivalent to a default.

Samson's Caa3 CFR reflects margins, cash flow and liquidity that have become increasingly stressed by low commodity prices and an over-leveraged balance sheet, raising concerns over the sustainability of the company's capital structure. The company is a large, predominantly natural gas producer that operates across a geographically diverse set of producing basins, few of which, however, offer compelling value in the current commodity price downturn.

Samson's SGL-4 Speculative Grade Liquidity Rating reflects its weak liquidity through 2015. With $567 million drawn under its $1.0 billion secured borrowing base revolving credit facility at September 30, availability of the unused amount of the revolver could become restricted should Samson be unable to comply with the facility's 1.5x first lien debt to EBITDA covenant, which we view as likely. The revolver has a scheduled maturity date of December 2016. In May 2014, Samson's revolving credit agreement was amended to reduce its borrowing base to $1.0 billion from $1.78 billion, while permitting it to incur an additional $500 million of second lien debt without a further, related reduction to the borrowing base. The second lien debt was not issued.

The Ca rating on Samson's $2.25 billion senior unsecured notes reflects the subordination of the senior unsecured notes to Samson's $1.0 billion senior secured revolving credit and its $1.0 billion second lien term loan's priority claim to the company's assets. The size of the claims relative to Samson's outstanding senior unsecured notes results in the notes being rated one notch below the Caa3 CFR under Moody's Loss Given Default Methodology. The Caa2 rating on Samson's $1.0 billion second lien term loan reflects its superior position in the capital structure compared to the unsecured notes and its second priority lien on all collateral securing the secured revolving credit facility.

The outlook is negative reflecting stressed liquidity. A downgrade would be considered if Samson's liquidity profile further deteriorates or should it pursue a distressed exchange of its debt. An upgrade could be considered should Samson materially improve its liquidity, and should higher natural gas and crude oil prices support increased cash flow generation.

The principal methodology used in these ratings was Global Independent Exploration and Production Industry published in December 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Samson Resources Corporation is a privately owned independent exploration and production company headquartered in Tulsa, Oklahoma. Samson was acquired in December 2011 by a Kohlberg Kravis Roberts & Co. L.P. (KKR)-led investor group for $7.2 billion in which KKR holds a 55% stake.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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.

Andrew Brooks
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Steven Wood
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades Samson's corporate family rating to Caa3
No Related Data.
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