S&P Cuts Chesapeake’s Credit Rating Over ‘Mounting Turmoil’

Joe Wertz / StateImpact Oklahoma

Chesapeake Energy's Oklahoma City campus.

Standard & Poor’s has once again downgraded Chesapeake Energy’s credit rating.

In late April, the ratings agency lowered the company’s rating to “BB” from “BB+.” Today, S&P lowered the rating another notch, to “BB-.”

Chesapeake Energy Corp. has suffered from mounting turmoil over revelations about its CEO’s personal financial transactions, and, given revised production expectations, external funding needs are likely to be higher over the next two years than we previously assumed, wrote S&P credit analyst Scott Sprinzen.

The ratings agency also views Chesapeake’s liquidity as “less than adequate,” and is worried about potential “setbacks” in funding its transition from natural gas to oil.

On May 11, Chesapeake announced it would borrow $3 billion from Goldman Sachs and Jeffries Group. The company is using the bridge loan to offset a cash-flow shortfall and to repay current borrowings while it completes sales of assets in the Permian basin and the Mississippi Lime.

Chesapeake’s stock dropped on news of the S&P downgrade. Shares of the company, which had ticked up on rumors of a potential investment by billionaire investor Carl Icahn, fell to $14.66 by 4 p.m.

The company’s stock fell to an annual low last Friday.