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TEXT-S&P revises Milagro Oil & Gas rating
May 30, 2012 / 3:12 PM / 6 years ago

TEXT-S&P revises Milagro Oil & Gas rating

May 30 - Standard & Poor's Ratings Services today said it revised its
recovery rating on Houston, Texas-based Milagro Oil & Gas Inc.'s senior secured
notes to '3', indicating our expectation of meaningful (50% to 70%) recovery in
the event of a payment default, from '4'. 	
    The 'CCC+' issue rating on the senior secured notes remains unchanged. 	
	
Our revision reflects Milagro's updated year-end 2011 reserve valuation as 	
well as the recent borrowing base reduction on its reserve based lending (RBL) 	
credit facility. These updates result in a higher recovery expectation for 	
Milagro's second-lien notes in our default scenario. Our price deck 	
assumptions for Milagro differ from the stressed price deck assumptions we 	
generally use when analyzing the recovery for U.S.-based Exploration and 	
Production (E&P) companies to reflect the risk of a near term default. We 	
generally use our recovery pricing assumptions of $45 per barrel of West Texas 	
Intermediate crude oil, $4 per million BTU of Henry Hub natural gas, and a 55% 	
natural gas liquids to WTI ratio. To value Milagro, we used an alternate set 	
of commodity price assumptions that are more reflective of the current 	
hydrocarbon pricing environment, albeit slightly conservative, given the 	
relatively high likelihood of a near-term default. These assumptions are in 	
line with the assumptions we use for our corporate credit analysis for 	
Milagro. 	
	
	
RELATED RESEARCH AND CRITERIA	
     -- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011	
     -- Criteria Guidelines For Recovery Ratings, Aug. 10, 2009.	
     -- Corporate Ratings Criteria 2008, published April 15, 2008.	
	
RATINGS LIST	
Milagro Oil & Gas Inc.	
 Corporate credit rating    CCC+/Negative/--	
	
                            To             From	
Revised Recovery Rating	
 Senior secured notes       CCC+           CCC+	
  Recovery Rating           3              4

0 : 0
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