S&P downgrades Tapstone

S&P said it downgraded Tapstone Energy LLC’s issuer credit rating to CCC+ from B- on free cash flow outspend and liquidity constraints.

S&P also lowered the issue-level rating on the company's senior unsecured notes to CCC+ from B-; and the outlook is negative.

The U.S. oil and gas exploration and production company’s leverage is expected to exceed prior estimates, and profitability is undermined by lower-than-anticipated oil mix production in the North West Scoop Stack, S&P said in a news release.

Additionally, Tapstone has limited liquidity capacity, which the company needs to maintain and grow current production.

“The negative outlook reflects our expectation that liquidity capacity and leverage covenant headroom will increasingly become pressured in 2019. As a result, the company will likely require alternative liquidity sources and or an amendment or waiver as early as 2020,” S&P said.

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