S&P: Paramount outlook negative

Standard & Poor's said it affirmed its B+ long-term corporate credit and B senior unsecured debt ratings on Paramount Resources Ltd. following the company's announcement of its intention to acquire natural gas and crude oil producing assets from Acclaim Energy Trust and EnerPlus Resources Fund for C$189 million. At the same time, S&P revised the outlook on Paramount to negative from stable.

The outlook revision reflects S&P's concerns regarding the company's recent track record of generating negative free cash flow and the limited financial flexibility associated with the company's aggressive spending program and increasing debt levels.

S&P said that if the company's financial flexibility remains constrained, the ratings could be lowered. Conversely, if there are no further acquisitions in 2004 and 2005, Paramount should be able to generate free cash flow during this period. If the company uses this cash flow to reduce debt and expands its hedging program to temper hydrocarbon price and cash flow volatility, the outlook could be revised to stable.

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