S&P rates Concho Resources notes BB

Standard & Poor's said it assigned a BB rating to Concho Resources Inc.'s proposed $350 million of senior unsecured notes due 2021 and assigned a 3 recovery rating to this debt, indicating an expectation of 50% to 70% recovery in a default.

Concho Resources plans to use proceeds from the debt offering, as well as the recent equity offering, to repay a portion of the existing indebtedness under its $2 billion credit facility, S&P said.

The existing credit facility agreement permits the company to issue up to $600 million of senior unsecured notes. However, an increase in the offering more than $400 million could lower the expected recovery rating to 4, indicating 30% to 50% recovery in a default.

The corporate credit rating is BB and the outlook is stable.

The ratings reflect its good reserve replacement performance, solid production growth and a favorable production mix given the current hydrocarbon price environment, S&P said.

The ratings also consider its concentrated reserve base and participation in the highly cyclical and capital-intensive exploration and production industry, the agency said.

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