S&P Global Ratings downgraded Southwestern Energy Co.'s issuer credit rating and the issue-level rating on its unsecured debt to BB- from BB with a negative outlook.
Ratings said it downgraded the company because it forecasts that weak prices for natural gas and NGLs, based on its lowered oil and gas price assumptions, will hurt Southwestern's cash flow and leverage metrics through 2021, according to an April 7 research update.
"We expect capital spending to exceed cash flow by approximately $300 million this year and $200 million in 2021 under our spending assumptions as the company develops its Marcellus properties," Ratings wrote.
The rating agency said Southwestern has approximately $200 million of debt maturing in 2022, which it anticipates will be repaid with cash flow or credit facility borrowings. "While we forecast adequate borrowing capacity, we note the borrowing base is subject to twice-yearly redeterminations and could be lowered due to low commodity prices," Ratings said.
The negative outlook indicates the rating agency's view that Southwestern's credit measures will be weak for the BB- rating, including funds from operations to debt in the low-20% area and debt to EBITDA of more than 3x over the next two years.
This S&P Global Market Intelligence news article contains information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.