Fitch Ratings on Sept. 14 said it has lowered the long-term issuer default ratings for Encino Acquisition Partners LLC and Encino Acquisition Partners Holdings LLC to B from B+. The ratings outlook is negative.

The rating agency also downgraded the two companies', or Encino's, senior secured second-lien term loan to B/RR4 from BB-/RR3, according to a news release.

Fitch said the downgrades reflect the agency's expectations that Encino's production may be lower than planned due to decreased drilling following a drop in natural gas and NGL prices early this year. Encino, the second-largest producer in the Ohio Utica Shale, has recorded a 25% production increase since it acquired Chesapeake Energy Corp.'s Utica Shale assets in 2018, according to the release. Fitch anticipates Encino's production to increase by 20% more during the year.

Additionally, the rating agency said it does not expect Encino to be able to generate positive free cash flow this year and in 2021, which may lead to an increase in its borrowings on its revolver due in 2023. Fitch said Encino's anticipated inability to generate positive free cash flow and its "challenged ability to access debt capital markets" are expected to potentially impact the companies' capacity to refinance its revolver and term loan due in 2025.

Encino has a $2 billion reserve-based credit facility due 2023, of which roughly $465 million has been drawn as of June. Encino was formed by Encino Energy LLC and the Canada Pension Plan Investment Board.