Moody’s: 11 offshore drillers on downgrade review

Moody’s Investors Service said it placed the ratings of 11 offshore drilling companies under review for downgrade.

The ratings under review include Diamond Offshore Drilling, Inc.’s A3 rating, Ensco plc’s Baa1 rating, Noble Corp.’s Baa3 rating, Rowan Cos. Inc.’s Baa3 rating, Transocean Inc.’s Ba1 corporate family rating, Atwood Oceanics, Inc.’s Ba2 corporate family rating, Seadrill Partners LLC’s Ba3 corporate family rating, Shelf Drilling Midco, Ltd.’s Ba3 corporate family rating, Ocean Rig UDW Inc.’s B2 corporate family rating, Paragon Offshore plc’s B2 corporate family rating and Pacific Drilling SA’s B3 corporate family rating.

Moody’s also said it affirmed the P-2 commercial-paper ratings for Diamond Offshore and Ensco.

The downgrade review is due to concerns that offshore drilling contractors will face an extremely challenging operating environment through at least 2017, Moody’s said.

Sustained weak crude oil prices and a steady supply of new-build rigs will cause significant credit erosion as contracted backlogs, revenues and cash flows continue to fade, the agency said.

Against this macro backdrop, fewer offshore drilling opportunities will be available, resulting in a potentially prolonged period of lower day-rates and fleet utilization, Moody’s said.

The review will focus on each drilling company’s financial flexibility and liquidity, contracted revenue backlog, fleet quality, customer composition, market position and new-build capital expenditure commitments and contract exposure, the agency said.

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