Moody’s lowers Extraction Oil

Moody’s Investors Service said it downgraded Extraction Oil & Gas Inc.’s corporate family rating to Caa2 from B2 and probability of default rating to Caa2-PD from B2-PD.

The agency also downgraded the ratings on the unsecured notes to Caa3 from B3. The speculative grade liquidity rating was downgraded to SGL-4 from SGL-3.

“The rating action reflects Moody’s concern about Extraction’s ability to redeem its $190 million preferred stock issue in 2021 at a time when exploration and production companies have limited capital market access. Refinancing risk is exacerbated by the likelihood of a significant borrowing base reduction in the upcoming redetermination due to a severe drop in commodity prices and Moody’s expectation that Extraction will face production declines given its substantially reduced 2020 capital budget,” the agency said in a press release.

Moody’s changed the outlook to negative from stable. “The negative outlook reflects Moody’s expectation that Extraction’s liquidity will weaken considerably over the next 12 months when the company will be challenged to address its preferred stock redemption,” the agency said.

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