S&P rates Calfrac notes B+

Standard & Poor's said it assigned a B+ issue and 4 recovery ratings to Calfrac Holdings LP's proposed $100 million add-on to existing senior unsecured notes due 2015.

The agency affirmed the B+ corporate credit and senior unsecured debt ratings and revised the recovery rating on the unsecured debt to 4 from 3.

The outlook is negative.

"The continued negative outlook reflects our concerns that Calfrac's operating margins and revenues in 2010 could continue to be negatively affected by the depressed North America natural gas market, and that the company's financial risk profile could deteriorate beyond what its rating will support," S&P analyst Jamie Koutsoukis said in a statement.

"However, we believe Calfrac's capital spending flexibility and expected increased liquidity following the issuance will provide some credit strength through the next fiscal year," Koutsoukis added.

Ratings reflect the company's participation in the cyclical oil and natural gas well-servicing sector, large exposure to the North American natural gas market, vulnerability to variable internal cash flow generation and profitability based on the cyclical industry, and its customer concentration risk, the agency said.

Calfrac's position servicing unconventional oil and gas development, and its moderate debt and adequate liquidity helps to somewhat offset these weaknesses, the agency noted.

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