Fitch: QEP Resources's Acquisition of Permian Acreage Within Expectations; No Rating Actions

CHICAGO--()--Fitch Ratings views QEP Resources's planned acquisition of Permian acreage for approximately $600 million as neutral to the company's ratings. The acquisition adds approximately 9,400 net acres and 76 thousand barrels of oil equivalent (mboe) of proved reserves to the company's nearby existing Permian acreage.

The additional acreage increases QEP's potential Permian drilling locations by 50% while also improving upstream credit metrics, including debt/flowing barrel and debt/1P. 98% of the acreage is held by production providing QEP with operational flexibility. The company expects to add one rig at the time of closing and anticipates the rig count to increase to five by third quarter 2018. The acquisition's production could approach 40 mboepd by 2019, representing an increasing portion of QEP's total production.

The transaction, which is anticipated to close on or before Sept. 30, 2016, is expected to be funded with cash on hand. Concurrently, QEP commenced an equity offering and expects to receive gross proceeds of approximately $367 million, or approximately $422.1 million if the underwriters exercise their option. Fitch expects QEP's liquidity will remain adequate as the company had $616 million in cash and no borrowings under their $1.8 billion credit facility as of March 31, 2016.

Fitch currently rates QEP Resources as follows:

QEP Resources, Inc.

--Long-Term Issuer Default Rating (IDR) 'BB';

--Senior unsecured bank facility 'BB/RR4';

--Senior unsecured notes 'BB/RR4'.

The Rating Outlook is Stable.

Additional information is available on www.fitchratings.com

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Colin Cordes
Associate Director
+1-312-368-3120
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Brad Bell, CFA
Associate Director
+1-312-368-3149
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
Email: alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Colin Cordes
Associate Director
+1-312-368-3120
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Brad Bell, CFA
Associate Director
+1-312-368-3149
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
Email: alyssa.castelli@fitchratings.com