Moody's Investors Service on April 3 downgraded Swift Energy's junk corporate family and default ratings, citing the company's dwindling performance. The ratings agency lowered the oil and natural gas producer's corporate family rating to B2 from Ba3, and its default rating to B3 from B1. It also cut the company's senior unsecured rating to B3 from B1. Moody's said the downgrade reflects the company's deteriorating operating performance, especially its continued high and unsustainable costs trends and growing financial leverage.
When oil and natural gas prices dropped sharply at the end of last year, Swift Energy found itself with 60-70 per cent less revenue over a period of only a few months. As a result of lower revenue, the company has been forced to cut its 2009 capital expenditures to $125 million, down from $674.8 million in 2008 (note that the main way to expand production is through acquisitions and other capital expenditures). The company also reduced its workforce by 11% to lower general and administrative costs. Despite a recent upward trend in oil prices, Moody's downgrade of Swift Energy debt and the company's poor operating performance prevent Swift Energy from growing significantly in 2009.