S&P downgrades Lucid Energy

S&P said it downgraded the long-term corporate credit rating on Lucid Energy Group II Holdings LLC to B from B+.

The agency also said it lowered the rating on parent, Lucid Energy Group II Borrower LLC's $950 million senior secured first-lien term loan due 2025 to B from BB- and revised the recovery rating on the debt to 3 from 2.

The downgrades reflect Lucid's elevated leverage and slower de-leveraging than previously forecast, S&P said.

The agency said it expects leverage to remain high in the 7x to 7.5x range for the next 12 months compared with a prior expectation of 4.5x to 5.5x due to lower cash flow from slower-than-expected ramp-up in volumes.

The company's 2018 financial performance was lower-than-expected due to lower activity ramp-up from decreased drilling by some producers, S&P said.

The stable outlook reflects a view that Lucid will execute the expansion of its gas gathering and processing infrastructure in the cost competitive Northern Delaware basin, S&P said.

The agency said it expects any additional volumes will continue to be supported by long-term fixed-fee contracts.

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