Moody’s lowers Weatherford

Moody’s Investors Service said it downgraded Weatherford International Ltd.’s corporate family rating to Ba3 from Ba1 with a negative outlook.

The downgrades reflect an expectation of fundamentally weaker oilfield services conditions through 2017, which will pressure Weatherford’s cash flow and credit metrics, the agency said.

Moody’s recently completed a review of seven U.S. oilfield services companies that led to several downgraded companies. Oil prices have dropped substantially, reflecting continued oversupply in the global oil markets, very high inventory levels and additional Iranian oil exports coming on line, Moody’s said.

The agency said it positively notes the actions Weatherford has taken in response to the downturn – including an equity raise, cost reductions, free cash flow generation and debt reduction.

But, Moody’s said it anticipates very weak upstream activity levels in 2016 and into 2017 to constrain cash flows.

With lower cash flows, Weatherford’s ability to reduce debt with free cash flow could become more constrained, resulting in a higher reliance on external sources of capital to repay upcoming debt maturities, the agency added.

The company’s ratings are supported by its scale and strong market positions in several product lines, geographic diversification and numerous patented products and technologies, the agency said.

© 2015 Prospect News.
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