TEXT-Moody's updates oil, gas exploration rating methodology

(The following statement was released by the rating agency)

Jan 7 - Moody's Investors Service has updated its published rating
methodology for the global exploration and production (E&P) industry. Our
rating methodology has not been substantially revised but the grid that
provides a summarized mapping of key factors has been updated to reflect rising
reserves replacement costs, higher leverage tolerance due to asset
appreciation, and historically high and volatile commodity prices. Moody's does
not expect credit ratings to change because of the revised methodology, which
is being implemented immediately.
"The updated methodology grid better encapsulates higher sector reserves
replacement costs, as well as the fact that asset values have appreciated,
which increases the amount of leverage that can be maintained for a given
rating level," said Moody's Vice President -- Senior Analyst Ken Austin, lead
author of the new methodology.
The weighting attributed to an issuer's size has been increased, because larger
companies tend to have better financial flexibility amid today's volatile
commodity and capital markets. A metric measuring debt relative to average
daily production has also been added to account for the proliferation of
unconventional resource plays, which often come with high leverage but
uncertain productivity.
The E&P rating methodology covers more than 60 companies that are engaged in
the exploration, acquisition, exploitation, and production of oil and natural
gas.
The revised approach incorporates many of the same factors that were used in
Moody's original E&P methodology such as size and scale of production and
reserves, finding and development costs, and leverage on the companies' reserve
base.
"We are still using the same basic principles in analyzing E&P companies as we
have historically," Austin said.
The global E&P rating methodology is intended to help market participants
understand how Moody's assesses credit risk and should allow readers to
estimate a senior unsecured rating (for investment grade) or a corporate family
rating (for speculative-grade) to within two rating notches. The methodology is
not an exhaustive treatment of every factor considered in a Moody's rating, but
should provide a framework of the key risks Moody's uses in its rating
determination.
The revised "Global Exploration and Production (E&P) Industry" rating
methodology is available on www.moodys.com.
(New York Ratings Team)