Boston, MA 10/10/2014 (wallstreetpr) – Standard & Poor’s created a deep trouble for Canada based natural gas producer, Talisman Energy Inc. (USA) (NYSE:TLM) yesterday. The credit rating agency has downgraded the company to just one point above junk over its inability to generate sufficient cash flow to counter higher operation costs.
Triple B Minus
Talisman Energy Inc. (USA) (NYSE:TLM) too has come to a self-realization that it has higher debt and cost eating away its profits. The company is already undergoing a process of restructuring in this direction, but has received less success. The continuous gas price pressure built in North American regions is further aggravating the debt situation of the company. Moreover, the company has made little meaningful steps to get rid of its non core assets in order to improve profitability.
In its report, S&P assigned triple B-minus to the company’s long term corporate and senior unsecured debt. The rating is considered lowest in the investment grade. Further, S&P does not see growth in Talisman Energy Inc. (USA) (NYSE:TLM)’s cash flow as it continues to battle slow output and high operating cost profile. In fact, S&P’s rival Fitch Ratings too had downgraded the company’s long term and senior unsecured debt from a triple B to triple-B-minus.
Expansion Follows Sale
Talisman Energy Inc. (USA) (NYSE:TLM)’s earlier management had plunged into aggressive overseas expansion through piling up debt and the lower gas price in North America turned out to be a bad event for the company. Since then, the company has been trying to sell its assets to pay down debt. The company has sold some of the rich assets like ones in Western Canada and a Colombian pipeline stake, but failed to find buyers for northern Iraq and the North Sea assets. The last two assets are draining nearly $900 million for the company each year. In July, the company’s second-quarter net loss widened to $0.23 per share from $0.09 over a year earlier.
