Chesapeake Energy Corp.'s corporate credit rating was cut to "CCC" from "CCC+" with a "negative" outlook by Standard & Poor's Ratings Services (S&P) following reports that the company is working with Kirkwood & Ellis LLP to improve its balance sheet and address upcoming maturities (see Shale Daily, Feb. 8). "The downgrade reflects the potential that Chesapeake could pursue a further debt exchange over the next 12 months and that we would view a transaction as distressed rather than opportunistic, and which we would consider a selective default," said credit analyst Paul Harvey. The financial picture appears "very weak over the next 24 months based on our natural gas and crude oil prices assumptions. Under these challenging conditions, we expect debt leverage to exceed 12 times on average. Additionally, liquidity is likely to be challenged under these low prices, both from diminished cash flows and potential reductions in the company's borrowing base."
Anadarko Petroleum Corp.has cut its quarterly dividend by 81% to 5 cents/share from 27 cents, payable March 23 to stockholders of record on March 9. "We believe this adjustment to our dividend is the appropriate action to take in the current environment," said CEO Al Walker. "On an annualized basis, this action provides approximately $450 million of additional cash available to enhance our operations and financial flexibility. Our board will continue to evaluate the appropriate dividend on a quarterly basis." The super independent reduced 2016 capital spending by 50% year/year after recording a $1.25 billion loss (minus $2.45/share) in 4Q2015 and a full-year loss of $6.69 billion (minus $13.18) (see Shale Daily, Feb. 2). Revenue in 4Q2015 fell to $2.05 billion from $3.18 billion, while cash flow from operating activities plunged to $257 million from $1.95 billion.