Resolute Energy Corporation -- Moody's rates Resolute Energy's senior notes B3

New York, December 06, 2012 -- Moody's Investors Service assigned a B3 rating to Resolute Energy Corporation's (Resolute) proposed $150 million senior unsecured notes due 2020. The new notes have the same terms and will be treated as a single series with Resolute's existing $250 million notes due 2020. Net proceeds from the notes offering will be used to finance the pending acquisition of certain assets in the Permian Basin from a private seller for approximately $120 million, to repay indebtedness under its revolving credit facility and for general corporate purposes. The rating outlook is stable.

"Resolute's tuck-in acquisition of certain Permian assets are complementary to its existing asset portfolio and provide the company with added scale and oil-weighted growth potential in the Permian to balance mature cash flows from its core Aneth Field operations," stated Michael Somogyi, Moody's Vice President -- Senior Analyst.

RATINGS RATIONALE

The B3 rating on the proposed $150 million senior notes reflects both the overall probability of default of Resolute, to which Moody's assigns a PDR of B2, and a loss given default of LGD 5 (76%). The senior notes are unsecured and guaranteed by current subsidiaries on a senior unsecured basis. All of the outstanding senior notes will be subordinate to Resolute's $330 million senior secured revolving credit facility. The size of this potential priority claim to the assets relative to the amount of the senior notes outstanding results in the notes being rated one notch beneath the B2 Corporate Family Rating (CFR) under Moody's Loss Given Default (LGD) Methodology.

The B2 CFR reflects Resolute's small, concentrated reserve base and low average daily production volumes. Resolute's primary asset is the Aneth Field in Utah. The company plans to use this mature, tertiary recovery (CO2), relatively low-risk, long-lived asset as the economic engine to generate free cash flow for reinvestment and to augment that with prudent levels of debt. Using cash flows from the production of about 90% oil and liquids in this field, Resolute intends to expand into new fields in Wyoming and 'oilier' properties in the Permian Basin and Rocky Mountain regions.

Resolute is acquiring approximately 6,500 net acres in the Permian with over 80% of the reserves located in the Midland Basin (Howard County, Texas) and the Denton Field (Lea County, New Mexico). Combined, the acquired properties will add 4.1 million barrels of oil equivalent (MMBoe) of estimated proved reserves, of which 73% are crude oil, and net over 1,400 Boe of daily production volumes. Although leveraging, pro-forma the Permian asset acquisition, Resolute will increase its total proved reserve base to 68.9 MMBoe, comprised of 91% liquids, and production volumes to over 10,000 Boe per day.

Moody's estimates Resolute's pro-forma leverage on average daily production and PD reserves, post this bond issuance, will rise to approximately $40,000/Boe and $11.50/Boe, respectively. We anticipate that increasing production growth from the development of core properties will lower these leverage metrics by mid-2014. In addition, potential asset divestitures, capital flexibility in Resolute's development plan and strategic commodity hedging also provide for opportunities to managing cash flows and leverage, while Resolute's liquidity profile is backstopped effectively full availability under its $330 million borrowing base revolving credit facility due April 2017.

The stable outlook is based upon our expectation that Resolute's leverage profile will not increase materially above current levels for a sustained period of time. A key barometer for consideration of an upgrade will be increased production beyond the Aneth field and development of oil-weighted reserves into the proved producing category. Should average daily production approach 25,000 Boe per day and proved developed reserves exceed 65 million Boe, a upgrade could be considered. The ratings would be pressured, however, should debt / average daily production exceed $47,000 per Boe or retained cash flow / debt decline below 20% for a sustained period.

The principal methodology used in rating Resolute Energy Corporation was the Global Independent Exploration and Production Industry Methodology published in December 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Resolute Energy Corporation is an independent exploration and production company headquartered in Denver, Colorado.

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Michael Somogyi Vice President - Senior Analyst Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Steven Wood MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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