S&P: Laredo on positive watch

Standard & Poor's said it placed its ratings on Laredo Petroleum Inc., including its B- corporate credit rating, on CreditWatch with positive implications.

In January, Laredo Petroleum issued $350 million of senior unsecured notes due 2019.

The CreditWatch listing follows news that Laredo has entered into a definitive agreement to merge with Broad Oak Energy Inc. in a transaction totaling $1 billion in aggregate consideration, S&P said.

The combined entity also would have a new credit facility with an initial borrowing base of $650 million, the agency said.

This transaction would enhance Laredo's business risk profile by increasing its scale, particularly in the Permian Wolfberry oil play, S&P said.

The agency said it expects Laredo to generate negative free cash flow in the near term as it funded its drilling program and that total debt-to-EBITDA could exceed 4x.

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