S&P Downgrades EnLink Midstream Partners (ENLK) to 'BBB-'; Follows Rating Action on Devon (DVN)

Standard & Poor's Ratings Services lowered its ratings on EnLink Midstream Partners L.P. (NYSE: ENLK) (EnLink), including lowering the corporate credit rating to 'BBB-' from 'BBB'. The outlook is stable. The rating actions follow the rating action on Devon Energy Corp., which controls EnLink's general partnership.

"The rating action on EnLink follows the rating action on Devon," said Standard & Poor's credit analyst Mike Llanos. We downgraded Devon to 'BBB' following a further downward revision to our forecasted commodity prices.

We assess EnLink's business risk profile to be fair reflecting the partnership's growing scale, largely fee-based contract profile (about 95% of operating margin) and strong customer relationship with Devon, which we expect will represent over half of 2016's projected EBITDA. We believe the incremental EBITDA from the partnerships recently announced acquisition of Tall Oak will be largely dependent on Devon's drilling program within the acreage dedication.

EnLink's financial risk profile is assessed as aggressive reflecting our view of adjusted debt to EBITDA in the upper half of the 4x to 5x range. While commodity prices have been revised downward from our previous forecast, we continue to believe 2016 adjusted debt to EBITDA will remain in the 4.5x to 5x range and the partnership will have a distribution coverage ratio of 1x. Our forecast assumes a moderate reduction in capital spending from earlier expectations due to the weaker commodity price environment.

The stable rating outlook on EnLink reflects our outlook on Devon, which controls the general partnership. Devon's stable outlook reflects our expectation that credit-protection measures will remain consistently within expectations for the ratings, including FFO to debt above 20% on a consistent basis. On a stand-alone basis we expect EnLink to maintain adequate liquidity while keeping adjusted debt leverage in the 4.5x to 5x range over the next two years.

We would lower the ratings if we lowered our rating on Devon. This could occur if Devon's leverage increased to the point that we no longer expect FFO to debt to remain above 20% on a consistent basis or if commodity prices deteriorate further. We could also lower the ratings if EnLink's sustains adjusted debt leverage above 5x.

Our rating on EnLink would only improve if we raised our rating on Devon. We could raise our rating on Devon if FFO to debt exceeds 45%. This could occur if the company pursued asset disposals at favorable prices with proceeds applied to debt reduction, or if commodity prices improved.

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