TEXT-S&P on Express Energy Services Operating

(The following statement was released by the ratings agency)

June 19 - Standard & Poor's Ratings Services today assigned its 'B' corporate credit rating to Express Energy Services Operating, LP (Express). The outlook is stable.

At the same time, we assigned a 'B+' rating (one notch above the corporate credit rating) and a '2' recovery rating to Express' proposed $360 million senior secured bank facilities, which consist of a $35 million revolving credit facility and a $325 million first-lien term loan. The '2' recovery rating indicates our expectation for substantial (70% to 90%) recovery in the event of a payment default.

Pro forma for the pending debt issuances, we expect that Express will have $337 million of adjusted total debt, consisting of a $325 million first-lien term loan and approximately $12 million of operating-lease adjustments. Term loan proceeds and an equity injection will be used to fund the $627 million purchase of the company by Macquarie Capital Group Limited, Wachovia Capital Partners, management and others; refinance existing debt of $285 million; and cover estimated transaction fees and expenses.

"The rating on Express reflects the company's position as a small niche oilfield service provider in a cyclical, volatile and highly competitive industry, combined with an aggressive growth strategy, significant working-capital needs and a fairly stringent covenant package and significant fixed charge obligations," said Standard & Poor's credit analyst Amy Eddy.

The rating also reflects good expected near-term performance given robust industry conditions, low maintenance capital spending needs, moderate leverage and healthy margins. (New York Ratings Team)