HOUSTON (Reuters) - U.S. shale producer Chesapeake Energy Corp on Thursday said debt downgrades from ratings agencies in December have its counterparties including pipeline companies asking for collateral as the downturn in crude prices lingers.
In December Moody’s and Standard & Poor’s lowered the Oklahoma City, Oklahoma company’s credit rating further into junk territory as crude oil lingered around $30 a barrel, a price that severely saps the cash flow of U.S. shale operators.
“Some of our counterparties have requested or required us to post collateral as financial assurance of our performance under certain contractual arrangements, such as transportation, gathering, processing and hedging agreements,” Chesapeake said in its annual filing with the U.S. Securities and Exchange Commission.
A slew of recent energy downgrades has put other companies in a similar spot, lawyers told Reuters.
As of Feb. 24, Chesapeake said it had received requests to post about $220 million in collateral, of which it posted approximately $92 million in the form of cash and letters of credit.
Chesapeake, which is also the second largest U.S. producer of natural gas, said it may be required to post additional collateral of $698 million, something that would negatively affect liquidity, according to the filing.
Chesapeake, which reported a 2015 loss of nearly $15 billion on Wednesday, has debt of $9.7 billion and borrowing capacity of $4 billion.
Reporting by Anna Driver; Editing by Terry Wade and David Gregorio