Rating Action: Moody’s rates Independence Energy’s notes B2; stable outlookGlobal Credit Research – 27 Apr 2021$500 million of new debt ratedNew York, April 27, 2021 — Moody’s Investors Service, (« Moody’s ») assigned first time ratings to Independence Energy Finance LLC (Independence), including a B1 Corporate Family Rating (CFR), a B1-PD Probability of Default Rating (PDR) and a B2 rating to the company’s proposed $500 million senior unsecured notes. The rating outlook is stable.Independence is a diversified independent exploration & production company with a portfolio of oil, gas, minerals and midstream assets in multiple basins across the Lower 48 states. Independence was formed by the private equity firm KKR and its management team is employed by KKR through a management services agreement. Independence’s assets include mature, low-decline reserve base with substantial portion of its near-term production hedged to provide predictable cash flow, in addition to an inventory of development opportunities. KKR has a significant ownership in Independence and holds the majority of the board of directors’ seats.Independence is seeking to raise $500 million of senior unsecured notes with proceeds used to refinance the company’s existing revolving credit facility. Pro forma for the transaction, Independence’s capital structure will consist of $500 million borrowing base senior secured revolving credit facility (RBL facility) due in 2025 and $500 million of unsecured notes due in 2026. »Independence’s ratings are supported by its low financial leverage, mature assets with low decline rate and strong cash margins aided by its substantial commodity hedge book. The company is constrained by its smaller size and scale and significant non-operated production and reserves, » commented Sreedhar Kona, Moody’s Senior Analyst. « Independence’s focus on cash flow generation and paydown of debt in lieu of higher capital spending and its ability to maintain production aided by its low decline rates contributes to its stable outlook. »Assignments:..Issuer: Independence Energy Finance LLC…. Probability of Default Rating, Assigned B1-PD…. Corporate Family Rating, Assigned B1….Senior Unsecured Notes, Assigned B2 (LGD5)Outlook Actions:..Issuer: Independence Energy Finance LLC….Outlook, Assigned StableRATINGS RATIONALEIndependence’s B1 CFR benefits from the company’s low debt leverage, strong cash margins helped by its significant commodity hedge book and outlook for substantial free cash flow generation. The company owns modest midstream infrastructure and mineral assets which enhance the company’s cash margins. The company is constrained by its relatively smaller scale in any of its operating regions, which is unlikely to grow significantly as the company focuses on free cash flow generation to reduce debt. Although a third of the company’s reserves are in the Eagle Ford basin which is oil rich, over 40% of the company’s overall production consists of natural gas, which yields lower cash margins than an oil-weighted production base on an equivalent unit of production. Almost half of the company’s current production and reserves are not operated by the company, and it constrains company’s control over its capital spending. The company’s conservative financial policy to further reduce debt through free cash flow supports the company’s ratings.Independence’s $500 million senior unsecured notes due in 2026 are rated B2, one-notch below the B1 CFR, reflecting the priority ranking of the company’s $500 million RBL facility due in May 2025.Moody’s expects Independence to maintain good liquidity. Pro forma for the notes issuance transaction closing, Independence will have $36 million of cash and about $250 million available under its RBL facility due in May 2025, after accounting for outstanding borrowings. Independence will fully fund its capital spending needs and debt service through 2021 from its operating cash flow. Under the RBL credit agreement, Independence is required to maintain total net debt/EBITDAX of less than 3.5x and a current ratio of greater than 1x. Moody’s expects Independence to maintain compliance with its financial covenants well into 2022.The stable outlook reflects Independence’s substantial hedge position and our view that Independence will generate sufficient free cash flow to pay down significant RBL facility borrowings while maintaining production largely flat.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSA ratings upgrade is unlikely in the near-term given the company’s focus on cash flow generation while keeping the size and scale growth largely flat. A ratings upgrade could be considered if Independence consistently grows its production and proved developed reserves while generating positive free cash flow and maintaining retained cash flow to debt above 35% and leveraged full cycle ratio above 1.5x. The company must also maintain adequate liquidity.Factors that could lead to a downgrade include declining production, a significant rise in debt or a deterioration of liquidity. Retained cash flow to debt below 25% could also lead to a ratings downgrade.Independence is a diversified independent exploration & production company with a portfolio of oil, gas, minerals and midstream assets in multiple basins across the Lower 48 states. KKR & Co has operating control of Independence.The principal methodology used in these ratings was Independent Exploration and Production Industry published in May 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1056808. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. 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Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is availablPlease see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Sreedhar Kona Vice President – Senior Analyst Corporate Finance Group Moody’s Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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