QEP Resources' (QEP) Move to Acquire Permian Basin Acreage Seen as Credit-Neutral Move: Fitch

Fitch Ratings views QEP Resources' (NYSE: QEP) planned acquisition of Permian acreage for approximately $600 million as neutral to the company's ratings. The acquisition adds approximately 9,400 net acres and 76 thousand barrels of oil equivalent (mboe) of proved reserves to the company's nearby existing Permian acreage.

The additional acreage increases QEP's potential Permian drilling locations by 50% while also improving upstream credit metrics, including debt/flowing barrel and debt/1P. 98% of the acreage is held by production providing QEP with operational flexibility. The company expects to add one rig at the time of closing and anticipates the rig count to increase to five by third quarter 2018. The acquisition's production could approach 40 mboepd by 2019, representing an increasing portion of QEP's total production.

The transaction, which is anticipated to close on or before Sept. 30, 2016, is expected to be funded with cash on hand. Concurrently, QEP commenced an equity offering and expects to receive gross proceeds of approximately $367 million, or approximately $422.1 million if the underwriters exercise their option. Fitch expects QEP's liquidity will remain adequate as the company had $616 million in cash and no borrowings under their $1.8 billion credit facility as of March 31, 2016.

Fitch currently rates QEP Resources as follows:

QEP Resources, Inc.
--Long-Term Issuer Default Rating (IDR) 'BB';
--Senior unsecured bank facility 'BB/RR4';
--Senior unsecured notes 'BB/RR4'.

The Rating Outlook is Stable.

You May Also Be Interested In

• Wolfe Research Downgrades Warner Brothers Discovery (WBD) to Underperform, 'out of concern that an incipient advertising downturn put guidance at risk'
• TopBuild (BLD) Announces Mutual Termination of Deal to Acquire Specialty Products and Insulation
• Neo-Concept International Group Holdings (NCI) Prices 2.32M Share IPO at $4/sh