S&P Affirms Noble Energy's (NBL) Ratings on Rosetta Resources Deal; Moves Financial Risk Profile to 'Significant'

Standard & Poor's Ratings Services affirmed its 'BBB' corporate credit rating on U.S.-based Noble Energy Inc. (NYSE: NBL). At the same time, we revised our assessment of the financial risk profile to "significant" from "intermediate" and the comparable ratings analysis modifier to "positive" from "neutral," as defined in our criteria. The rating outlook remains stable.

"Noble Energy Inc. and Rosetta Resources Inc. have announced an agreement whereby Noble will acquire Rosetta for about $2.1 billion of stock and assume about $1.8 billion of Rosetta's outstanding debt," said Standard & Poor's credit analyst Michael Tsai. "The transaction will give Noble a presence in the Eagle Ford and Permian Basin, improving the company's diversity among the major U.S. unconventional plays," he added.

We revised Noble's financial risk assessment to "significant" from "intermediate" based on our projection that adjusted debt to EBITDA will increase above 2x pro forma for the transaction. The business risk profile of "satisfactory" remains unchanged. We revised the comparable ratings analysis modifier to "positive" from "neutral," which reflects our view that the company compares favorably with 'BBB-' peers because of its scale, scope, and diversity, including core operating areas in four major U.S. unconventional plays, as well as the Gulf of Mexico, Israel, and West Africa.

The stable rating outlook on Noble Energy Inc. reflects its pipeline of development projects and Standard & Poor's Ratings Services expectation that credit measures will remain satisfactory for the rating category. We currently project FFO to debt to average about 35% and adjusted debt to EBITDA of between 2x and 2.5x.

We could lower our ratings on Noble if business trends weakened, operating performance deteriorated, or if the company used debt-financed acquisitions, such that our projected FFO to debt decreased below 30% and adjusted debt to EBITDA increased above 3x for a sustained period.

We consider an upgrade over the next year unlikely, given our assessment of Noble's business risk and the scale, size, and scope of the company's operations.

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