WaterBridge Midstream Operating LLC Assigned 'B' Issuer Credit Rating And Stable Outlook; Debt Also Rated

  • Texas-based water management solutions company WaterBridge Midstream Operating LLC is issuing a $1 billion term loan B due 2026 to refinance its capital structure, fund the acquisition of PDC Energy Inc.'s water infrastructure assets, and fund capital expenditures.
  • We assigned our 'B' issuer credit rating to parent company WaterBridge Operating LLC (WaterBridge) and WaterBridge Midstream Operating LLC (Midstream).
  • We also assigned our 'B' issue-level rating and '3' recovery rating to Midstream's $1 billion term loan B.
  • At the same, we assigned a 'BB-' issue-level rating and '1' recovery rating to the $150 million super-priority revolving credit facility due 2024.
  • The stable outlook reflects our view that WaterBridge will successfully integrate its recent acquisitions resulting in adjusted debt to EBITDA of approximately 5x for 2019.
NEW YORK (S&P Global Ratings) May 31, 2019--S&P Global Ratings today took the rating actions listed above. Our 'B' issuer credit rating on WaterBridge reflects the company's relatively limited yet growing scale of operations, geographic concentration, and aggressive growth strategy. We forecast adjusted leverage of approximately 5x for 2019 to improve to the mid-4x area for 2020 as it realizes a full year of cash flows from its recent acquisitions.
The stable outlook reflects our view that WaterBridge will successfully integrate its recent acquisitions resulting in adjusted debt to EBITDA of approximately 5x for 2019 improving to the mid-4x area by 2020 due to growing volumes year over year.
Though unlikely in the next 12-months, we could consider higher ratings for WaterBridge if it successfully increases the scale and scope of operations while maintaining adjusted leverage below 4.5x. This could also occur if the company notably increases its level of minimum volume commitments, which would result in less volatility under a prolonged period of weak commodity prices.
We could consider lower ratings if adjusted leverage stays above 5x in 2020, which could occur from a sharp decline in crude oil prices leading to reduced drilling and oil production (and, as a result, lower water volumes). This could also occur if the company pursues a more aggressive strategy of financial policy. Additionally, we could consider lower ratings if more stringent environmental or regulatory factors impair operations.
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