Moody's: Paramount outlook negative

Moody's Investors Service said it changed Paramount Resources Ltd.'s outlook to negative from stable and affirmed the company's B3 corporate family rating.

The agency assigned a Caa2 rating (LGD5, 82) to Paramount's proposed C$250 million senior unsecured notes.

Proceeds will be used to repay the company's $90.2 million senior secured notes and to prefund capital expenditures for 2011.

"The negative outlook reflects a significant increase in Paramount's near term leverage and the considerable execution risk surrounding the plan to rapidly grow upstream natural gas production in 2011 and 2012 in tandem with the expansion of midstream gas processing capacity," Moody's senior vice president Terry Marshall said in a statement.

Paramount's B3 corporate family rating is supported by its substantial alternate liquidity and historically low leverage, which has weakened substantially following the new debt issue but is expected to improve over the next 18 months, according to the agency.

The rating is constrained by the company's poor operating track record, high full-cycle costs, and small production and reserves base, the agency said.

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