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I AGREE
15 Jun 2010
Approximately $160 million of debt affected
New York, June 15, 2010 -- Moody's Investors Service upgraded Brigham Exploration Company's
(Brigham) Corporate Family Rating (CFR) to Caa1 from Caa2 and the Probability
of Default Rating (PDR) to Caa1 from Caa2. Moody's also upgraded
Brigham's $160 million senior unsecured notes due 2014 to
Caa2 from Caa3 and its Speculative Grade Liquidity rating to SGL-1
from SGL-2. The rating outlook is positive.
The rating upgrade and positive outlook reflects Brigham's property
portfolio transformation, strong expected production trends,
strong liquidity and financial flexibility after issuing a cumulative
$576 million in equity since May 2009 to fund accelerated drilling
of the firm's promising properties in the Williston Basin of North
Dakota and Montana where it holds 305,400 net acres in the Bakken/Three
Forks oil shale play. The company believes 2010 production will
rise over 40% from 2009 levels.
Nevertheless, while Brigham's recent results and 2010-11
drilling program are positive and provide cash flow visibility,
the company remains very small measured by production and proven reserves
and future growth and full-cycle reinvestment costs are fairly
undiversified, being largely reliant on Bakken/Three Forks.
The company's year-end 2009 proven developed reserves declined
from 2008 levels. However, large proven undeveloped reserve
bookings, which require heavy capital spending and face execution
risk, did help reduce finding and development costs. By year-end
2010, production rates relative to capital invested and finding
and development costs will better assess the capital intensity of reserve
replacement and production growth.
In April 2010, Brigham completed a $290 million equity offering
and announced the acceleration of its 2010 and 2011 drilling programs.
The company will double its rig count in the Williston Basin from four
to eight rigs by early 2011 (5 rigs running currently), and anticipates
its annual drilling rate to be approximately 80 gross wells a year.
Total 2010 capex is expected to be $294 million, up from
its original budget of under $200 million. The expanded
drilling program, while concentrated in the Williston Basin,
significantly reduces individual new well risk and well sequencing in
Brigham's efforts to grow production and replace reserves.
So far this year, Brigham has completed 14 wells, with an
average initial production rate of over 3,000 boe/d.
The positive outlook reflects Brigham's improved liquidity profile,
the increasing proportion of liquids production, comprising 66%
of total production during the first quarter of 2010 and up 24%
volumetrically over fourth quarter 2009, and the expectation that
Brigham's accelerated drilling program results will translate into
sustainable production and reserve growth.
Leverage levels, as measured by its reserve base and production
levels, constrain the rating at the Caa1 level. While benefiting
from Brigham's debt reduction in the fourth quarter of 2009 and
a rising production trend, leverage remains elevated. Debt
to average daily production was over $32,000 per boe in the
first quarter of 2010, debt to proven developed reserves was $17.05
per boe and debt plus future development costs to total proven reserve
was slightly lower at $15.92 per boe. While all three
leverage metrics remain in the Caa range, rapid production growth
this year will reduce leverage on production and leverage on reserves
should decline significantly.
Further positive rating actions could await assessment of year-end
2010 reserve addition metrics and costs as well as continued sustained
production growth at suitable capital costs. Higher ratings could
result from substantial growth in proven developed reserves and reduced
leverage on reserves and production. A negative rating action could
occur if Brigham's finding and development costs were unsustainably high
or production does not adequately respond proportionally to continued
heavy capital spending.
The last rating action on Brigham was October 29, 2009 at which
time Brigham's CFR, PDR, and unsecured note ratings
were upgraded to Caa2, Caa2, and Caa3, respectively.
The principal methodology used in rating Brigham was Moody's Global Independent
Exploration and Production Industry rating methodology published in December
2008. The methodology is available on www.moodys.com
in the Rating Methodologies sub-directory under the Research &
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.
Brigham Exploration Company is headquartered in Austin, Texas.
New York
Steven Wood
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Andrew Oram
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's upgrades Brigham Exploration to Caa1, outlook positive
No Related Data.
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