S&P downgrades Lone Pine

Standard & Poor's said it lowered the long-term corporate credit rating on Lone Pine Resources Canada Ltd. to CCC+ from B-, along with the rating on its senior unsecured notes to CCC- from CCC.

The 6 recovery rating on the notes is unchanged.

The agency also said it placed the ratings on CreditWatch with negative implications.

The downgrades reflect an assessment that Lone Pine could face a near-term liquidity crisis, S&P said.

The company is likely to violate the maximum leverage covenant under its revolving credit facility at the end of the second quarter of 2013 because its ability to generate EBITDA remains weak, the agency said.

In response to weak commodity prices and tight liquidity position, Lone Pine has reduced its capital expenditures such that it cannot maintain a stable production, which leads to a declining cash flow.

The ratings reflect the company's vulnerable business risk profile and highly leveraged financial risk profile, S&P said.

The ratings also consider Lone Pine's potential to breach its financial covenants, weak liquidity and worsening cash flow due to declining production, the agency said.

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