S&P cuts Houston Exploration, rates loan BB

Standard & Poor's said it lowered its corporate credit rating on The Houston Exploration Co. to BB- from BB following the company's announcement that it intends to sell its entire Gulf of Mexico assets and authorized a $200 million share repurchase program.

Other ratings lowered include senior unsecured debt to BB- from BB and subordinated debt to B from B+.

S&P said it also assigned its BB rating and a recovery rating of 1 to Houston Exploration's proposed $750 million senior secured bank credit facility due 2010.

The outlook is stable.

The rating action incorporates execution risk associated with the planned sales and necessary reinvestment at a time when oil and gas properties are trading at very high prices, combined with the company's announced $200 million share repurchase program, S&P said.

S&P added that the company's significant drilling-expenditure plans, increasing finding and development cost structure and need for more acquisitions pressures the company's overall financial profile, which is viewed as more commensurate with its peers at a BB- rating level.

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