A pair of Denver-based oil and gas producers said plummeting commodity prices weighed on first quarter earnings and muddied their 2020 outlooks, necessitating investment cuts.

Extraction Oil & Gas Inc. said it had engaged strategic advisers after disclosing that it may not meet covenants on its credit facility for the current quarter, while Highpoint Resources Corp. posted a steep quarterly loss driven by an impairment charge of more than $1 billion linked to weak demand and depressed prices.

Extraction, which operates in the Denver-Julesburg (DJ) Basin, is actively cutting costs and delaying investments. However, near-term revenue opportunities are dwindling with production slowing substantially and prices stubbornly low.

Production averaged about 94,000 boe/d in the first quarter, up from 80,400 a year earlier.

“Due to the continued uncertainty in the commodity markets, we made the decision during the middle of April to release both our operated drilling rigs and our completion crew,” CEO Matthew Owens said. “Aside from possibly completing one drilled but uncompleted pad in Greeley during the second half of the year, we are delaying further operating, drilling and completion activity until prices improve.”

Extraction executives did not field questions on the quarterly conference call. The company also withdrew all guidance.

In late April, Extraction’s lenders reduced the company’s borrowing base by $300 million to $650 million. The redetermination reduced its available liquidity to about $80 million. “And out of an abundance of caution in these uncertain times, we drew down that remaining $80 million to hold on our balance sheet,” Vice President of Finance Marianella Foschi said on the recent earnings call.

Fitch Ratings in mid-May downgraded Extraction’s long-term issuer default rating to “CC” from “B-” citing concerns that the company may undergo a private restructuring or seek Chapter 11 bankruptcy protection. Fitch also noted Extraction’s increasing refinancing risk; it has $185 million preferred stock issuance due in October 2021 and a large revolver balance that is due in August 2022. S&P Global Ratings also lowered its rating to “CC” from “CCC+” amid expectations of a debt restructuring.

Extraction reported 1Q2020 net income of $9 million (3 cents/share), boosted by a $263 million gain on commodity derivatives. This compared with a net loss of $94 million (minus 60 cents) a year earlier.

Highpoint, meanwhile, said it had deferred drilling and completion activity until oil prices improve. The independent, which also operates in the DJ, is preserving liquidity and working to ensure free cash flow generation.

First quarter production volumes were up 4% year/year at 2.9 million boe.

“We will continue to assess changes in the broader markets as well as current and future oil prices to determine the appropriate time to resume operations,” CEO Scot Woodall said on the recent earnings call.

The company paid down its debt by $45 million, or 32%, in the first quarter. Highpoint, now in the midst of its semiannual redetermination of our credit facility, is also bracing for reduced borrowing capacity.

“The banks have faced significant challenges with many borrowers and have become more restrictive with commitments and structures,” CFO William Crawford said on the call. “We are not immune to these effects…We expect our borrowing base could be reduced by up to 40% and our borrowing capacity reduced a little bit further as banks are seeking stronger cushion and reduced exposure to the space.”

The company reported a net loss of $1.02 million (minus $4.81/share), because of a one-time impairment of nearly $1.27 million to reduce the value of its properties. A year earlier, net losses totaled $96.2 million (minus 46 cents).