S&P lowers Source Energy view to negative

S&P said it revised the outlook on Source Energy Services Ltd. to negative from stable.

The agency said it believes estimated lower sales volumes and realized pricing for Source's frac sand production would lead to Source generating significantly weaker cash flow leverage metrics over the next 12 months.

S&P also affirmed the B long-term issuer credit rating on Source and B+ rating on Source Energy Services Canada LP and Source Energy Services Canada Holdings Ltd.'s first-lien secured debt.

The negative outlook reflects the risk that Source's leverage metrics could remain elevated with debt-to-EBITDA remaining high than 3x if the frac sand volumes and realized price remain weak during the outlook period, the agency said.

The outlook revision primarily reflects Source's weaker-than-expected cash flow leverage metrics, owing to an estimated lower hydraulic fracturing activity in the Western Canadian Sedimentary Basin in the next 12 months, S&P added.

The negative outlook reflects the risk that Source's leverage metrics could remain elevated and debt-to-EBITDA will remain higher than 3x, the agency said.

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