OREANDA-NEWS. S&P Global Ratings said today that it assigned its 'BB+' issue-level '3' recovery ratings to U. S.-based oil and gas exploration and production company Range Resources Corp.'s planned senior unsecured note offering. The '3' recovery rating indicates our expectation for meaningful (higher end of the 50%-70% range) recovery in the event of a default. The company is offering the new notes at par in exchange for Range's existing senior subordinated notes due 2021, 2022 and 2023, and in exchange for Memorial Resource Development Corp.'s (MRD's) senior unsecured notes due 2022 in conjunction with Range's acquisition of MRD. The new notes have the same coupon and maturity as the existing notes.

The 'BB+' corporate credit rating and negative outlook on Range and the 'BB+' issue-level ratings on its existing senior subordinated notes and senior unsecured notes are unchanged. We expect to review our issue-level rating on the remaining subordinated notes following the close of Range's exchange and tender offers. We could lower our rating on the subordinated notes depending on the level of acceptance of the offers and our assessment of subsequent asset coverage.

Our ratings on Range reflect our assessment of its business risk as satisfactory and financial risk as aggressive. Our business risk evaluation incorporates the large scale of its reserves and production, geographic concentration in the Marcellus shale, low operating costs, significant inventory and resource potential to support production growth, high exposure to natural gas prices, and the cyclical and capital-intensive nature of the E&P industry. Our assessment of Range's financial risk as aggressive reflects aggressive capital spending, moderately high financial leverage, and negative free cash flow generation. We would likely consider a stable rating outlook if Range's leverage measures improve more quickly than currently assumed, such that funds from operations to total debt rose to near 20% and debt to EBITDA declined closer to 4x on a sustained basis.