Concluding its review of four B-rated E&Pcompanies, Moody's on March 28 downgraded Breitburn Energy Partners LP's and 'corporate family ratings by three notches, to Caa2 from B2.
Both partnerships' outlooks remain negative, accordingto the rating agency.
Moody's attributed its downgrade of Breitburn to thepartnership's high leverage and limited asset coverage. Moody's said in astatement that Breitburn has constrained financial flexibility paired with ahigh cost of capital. Its MLPstructure also puts Breitburn at risk, as the partnership'sacquisitive growth strategy would require continuous cash distributions andexternal funding requirements, Moody's said.
Memorial's downgrade reflects the partnership'sdeteriorating credit metrics and weakening liquidity, with Moody's expectingfurther decline through 2016 and 2017. Memorial is also likely to have itsborrowing base reduced during the spring bank redetermination, which"materially restricts [Memorial]'s liquidity and its ability to maintainits current production levels," according to Moody's.
Also as part of its review, Moody's downgraded Vine Oil& Gas' corporate family rating to Caa1 from B3, with a negative outlook.The rating agency affirmed its B2 corporate family rating on Memorial ResourceDevelopment Corp., with a stable outlook.
The negative stances reflected in the March 28 actionswere attributed widely to the drop in oil prices as a result of continuingoversupply in the global oil markets, very high inventory levels and Iranianoil exports further saturating the market. Moody's sees a slow price recoveryover the next several years.
The rating agency recently lowered its oil priceestimates to reflect this expectation and warned of more for energycompanies.