S&P lowers Ruby Pipeline

S&P said it downgraded Ruby Pipeline LLC to B+ from BB citing depressed commodity prices and the pressure that will put on Ruby in the contracting process.

Also, the agency cut the rating on the company’s senior notes to BB- from BB and revised the recovery rating to 2 from 3. The 2 rating indicates substantial (70%-90%; rounded estimate: 85%) recovery in the event of a default. The recovery rating is no longer capped at 3 with the downgrade, S&P said.

“Before the recent commodity price decline, the outlook for production in the Rockies was already challenged due to prevailing economics and potentially more stringent legislation in Colorado. This additional pressure on commodity prices, combined with the low pricing spread between Opal and Malin, could result in producers and marketers exiting this market at a greater rate than anticipated. This is material for Ruby because 65% of its firm take-or-pay contracts, mostly with producers and marketers, are set to expire by mid-2021,” S&P said in a press release.

The outlook is negative.

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