3/10/2020 Standard & Poor's Americas (/en_US/web/guest/home) Hilcorp Energy I L.P. Ratings Placed On CreditWatch Negative On Proposed Acquisition Of BP's Alaska Operations 29-Aug-2019 14:03 EDT View Analyst Contact Information Table of Contents Related Criteria U.S.-based oil and gas exploration and production (E&P) company Hilcorp Energy I L.P. announced its intent to purchase all of British Petroleum's (BP) Alaska operations for $5.6 billion. Hilcorp is currently in discussions with its banks and has not yet disclosed its plans to finance the transaction, but we believe that the company will have higher leverage once the transaction closes. As a result of the likely increase in leverage, we are placing our ratings on Hilcorp, including the 'BB+' issuer credit rating and 'BB+' senior unsecured debt ratings, on CreditWatch with negative implications. CENTENNIAL (S&P Global Ratings) Aug. 29, 2019—S&P Global Ratings today took the rating actions above. Hilcorp Energy I LP announced its intention to acquire all of BP's Alaska operations. The transaction, which we expect to close early to mid-2020, will allow the company to increase its production and reserve base, reinforcing Hilcorp's position as the largest private oil and gas operator in the state. BP estimates net oil production from Alaska operations to average nearly 74 mmboe/d in 2019. This transaction would effectively double the size of Hilcorp's operations in Alaska. The CreditWatch negative placement reflects our view that we could lower the issuer credit rating on Hilcorp following the acquisition of BP's Alaska operations based on the likelihood of higher leverage. In resolving the CreditWatch, we will assess the effect of the acquisition on Hilcorp's production and reserves, its operating and capital costs, as well as the company's plan to finance the transaction. We will take into account the amount of debt and cash allocated to the entity, updated capital spending and cost assumptions, and our outlook for the E&P sector. We intend to resolve the CreditWatch at the close of the transaction, expected early to mid-2020. Related Criteria General Criteria: Group Rating Methodology (/en_US/web/guest/article/-/view/sourceId/10999747), July 1, 2019 Criteria Corporates General: Corporate Methodology: Ratios And Adjustments (/en_US/web/guest/article/-/view/sourceId/10906146), April 1, 2019 Criteria Corporates General: Recovery Rating Criteria For Speculative-Grade Corporate Issuers (/en_US/web/guest/article/-/view/sourceId/9831306), Dec. 7, 2016 Criteria Corporates General: Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers (/en_US/web/guest/article/-/view/sourceId/8956570), Dec. 16, 2014 Criteria Corporates Industrials: Key Credit Factors For The Oil And Gas Exploration And Production Industry (/en_US/web/guest/article/-/view/sourceId/8378755), Dec. 12, 2013 https://www.standardandpoors.com/en_US/web/guest/article/-/view/type/HTML/id/2290991 1/3 3/10/2020 Standard & Poor's Americas General Criteria: Country Risk Assessment Methodology And Assumptions (/en_US/web/guest/article/-/view/sourceId/8313032), Nov. 19, 2013 General Criteria: Methodology: Industry Risk (/en_US/web/guest/article/-/view/sourceId/8304862), Nov. 19, 2013 Criteria Corporates General: Corporate Methodology (/en_US/web/guest/article/-/view/sourceId/8314109), Nov. 19, 2013 General Criteria: Methodology: Management And Governance Credit Factors For Corporate Entities (/en_US/web/guest/article/-/view/sourceId/7629699), Nov. 13, 2012 Criteria - Corporates - Industrials: Revised Assumptions For Assigning Recovery Ratings To The Debt Of Oil And Gas Exploration And Production Companies (/en_US/web/guest/article/-/view/sourceId/7546190), Sept. 14, 2012 General Criteria: Use Of CreditWatch And Outlooks (/en_US/web/guest/article/-/view/sourceId/5612636), Sept. 14, 2009 Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. 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