S&P: HighPoint Resources Corp. Upgraded To 'B' From 'B-' On Improved Financial Metrics; Outlook Stable; Debt Rating Raised

S&P Global Ratings today raised its corporate credit rating on HighPoint Energy Corp. to 'B' from 'B-' and removed it from CreditWatch, where we placed it with positive implications on Dec. 6, 2017. The outlook is stable.

We also raised our issue-level rating on the company's senior unsecured debt to 'B' from 'CCC+' and removed the ratings from CreditWatch with positive implications. We revised the recovery rating on the senior unsecured debt to '3' from '5', indicating our expectation of meaningful (50% to 70%; rounded estimate: 50%) recovery in the event of a default.

Our ratings on HighPoint, formerly known as Bill Barrett Corp., reflect our expectation of improved operational performance as a result of the successful equity-funded merger with Fifth Creek Energy Co. LLC as well as the completion of: an above-par $50 million debt for equity exchange and a $110.7 million public equity offering to fund its 2018 drilling program. Based on our expectation for significant production growth this year and in 2019, we anticipate credit metrics to strengthen over the next 12 to 24 months.

The stable outlook reflects S&P Global Ratings' view that HighPoint Resources will grow production and developed reserves, while maintaining FFO/debt above 20% and adequate liquidity over the next 12 months.

We could lower the ratings if we expected FFO/debt to fall below 20% for a sustained period, or if liquidity weakened. This would most likely occur if the company did not achieve the production growth we anticipate.

We could consider raising the rating on HighPoint if the company increased its production and proved developed reserve base to levels more in line with higher rated peers while maintaining FFO/debt above 20% and adequate liquidity.
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