Commenting on Unocal Corp.’s announcement late last week that it has agreed to acquire the outstanding limited partner interest in Spirit Energy 76 Development LP., Standard & Poor’s Ratings Services said the action would have no immediate effect on the El Segundo, CA-based independent’s current ratings or outlook (BBB+/Stable/A-2).

Spirit Energy, a consolidated limited partnership that holds interests in certain oil and gas producing properties in the U.S. Gulf of Mexico region, has been reflected as minority interest on Unocal’s balance sheet. Under the deal, Unocal will pay the limited partner $252 million in exchange for the partnership interest. The transaction is expected to be completed in the next 30 days.

Unocal said the acquisition is part of its recently announced program to use the company’s available cash to prepay debt and other financings. Fittingly, many of the oil and gas producing properties in which Spirit LP holds interests are part of the asset divestiture program.

S&P said the acquisition will prevent the reclassification of Unocal’s minority interest in Spirit Energy to long-term debt during the third quarter as a result of FASB Interpretation No. 46. The agency said it expected that Unocal would exploit the current pricing upcycle by applying free cash flow to debt-reduction measures. The minority interest on Unocal’s consolidated balance sheet related to Spirit LP was $251 million as of March 31.

S&P said it expects to see additional actions to reduce debt and improve operating results, particularly in the lower 48 states, in the near-to-medium term, noting that this has already been factored into the current ratings.

Spirit Energy was formed in 1999 when Unocal contributed fixed-price overriding royalty interests from its working interest shares in certain Gulf of Mexico oil and gas producing properties to the limited partnership. In exchange, Unocal received an initial 55% general partnership interest in Spirit Energy. The unaffiliated investor contributed $250 million in cash to the partnership in exchange for an initial 45% limited partnership interest.

Spirit Energy was considered Unocal’s U.S. Lower 48 exploration and production unit, with major operations onshore in Texas and Louisiana and on the Gulf of Mexico shelf.

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