Moody's rates Seitel notes B3

Moody's Investors Service said it assigned first-time ratings to Seitel Inc., issuing a B3 rating to its proposed senior unsecured notes offering and a B2 senior implied rating.

The new ratings are assigned in conjunction with Seitel's Chapter 11 plan of reorganization which will become effective upon satisfaction of all conditions, including the closing of the notes offering and raising of $75 million of additional equity. Moody's also assigned a speculative grade liquidity rating of SGL-3 to Seitel.

According to Moody's, the ratings are restrained by the need to see solid operating performance and financial discipline from the new senior management following the company's emergence from bankruptcy protection; Seitel's earnings and cash fluctuations due to the volatility of the exploration and production sector; the softness of the seismic sector despite upcycle commodity prices and flush cash flows by exploration and production companies for more than a year; Seitel's concentration within the onshore mature oil and gas basins in North America; and the lack of ample capital to spend on new data acquisitions to remain competitive in the seismic sector.

Moody's said the ratings are supported by Seitel's focus in the onshore seismic market which has fared better than the marine seismic sector; a stronger capital structure pro forma for the reorganization; the outsourcing of its data acquisition operations, which keeps costs low, margins healthy, and allows Seitel to use emerging technologies in acquiring new data acquisition; and its strategy of securing underwriting for significant portions of its new seismic acquisitions for the multi-client library, which reduces the risk derived from the speculative nature of multi-client data.

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