S&P Assigns 'B' Corp. Credit Rating to Triangle USA Petroleum (TPLM); Rates $350M Notes Offering

Standard & Poor's Ratings Services said it assigned its 'B' corporate credit rating to Denver, Colo.-based Triangle USA Petroleum Corp, a unit of Triangle Petroleum (NYSE: TPLM). The outlook is stable.

At the same time, we assigned our 'CCC+' issue rating to Triangle USA's proposed $350 million senior unsecured notes due 2022. The recovery rating is '6', indicating our expectation of negligible (0% to 10%) recovery in the event of a payment default, albeit at the high end of the range.

We expect net proceeds from the debt offering will be used to refinance Triangle USA's existing debt and to repay acquisition capital provided by its parent, Triangle Petroleum Corp.

"The stable outlook on Triangle USA Petroleum Corp. reflects our expectation that Triangle USA's operational performance will continue to expand production as it develops the reserves in the Williston basin while maintaining solid profitability and adequate liquidity," said Standard & Poor's credit analyst Mark Salierno.

We could lower the rating if debt leverage exceeds 4x on a sustained basis or if liquidity were to erode with no near-term solution. Both of these scenarios would likely follow weak drilling results combined with a prolonged period of realized crude oil prices below $70 per barrel. In addition, we could also consider a lower rating if weaker-than-expected profitability causes us to reassess the business risk profile to "vulnerable" from "weak". We could also lower the ratings if Triangle USA were to pursue a more aggressive financial policy.

Although unlikely in the next year, an upgrade could be considered if Triangle USA meaningfully expands its reserve base and production output while maintaining credit measures close to current levels and more closely aligning capital spending with cash flow to preserve adequate liquidity. This could occur if Triangle USA can successfully execute its growth strategy and more than double current daily production output while the price of crude oil continues to exceed $90 per barrel.

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