Moody's Downgrades Offshore Drillers, Including Ensco, Transocean

Moody's Downgrades Offshore Drillers, Including Ensco, Transocean
Offshore drilling contractors likely to struggle through at least 2018, Moody’s Investors Service says in a new report.

Prolonged weakness in oil and gas prices is taking its toll throughout the energy industry, and as such, Moody’s Investors Service is recalibrating its ratings for several companies in one direction: down.

“The drop in oil prices and weak natural gas prices has caused a fundamental change in the energy industry, and its ability to generate cash flow has fallen substantially,” analysts write in a Feb. 26 credit research report. “Moody’s believe this condition will persist for several years.”

Upstream cuts in capital spending at upstream companies and a decline in their creditworthiness, along with a steady supply of newbuild rigs in an already over-supplied market, will keep dayrates under pressure through 2018, Moody’s said. As current drilling contracts roll off and are replaced by contracts with lower dayrates, the investors group said leverage and cash flow will deteriorate sharply.

As a result of the fundamental shift throughout the industry, Moody’s is taking another look at the credit ratings of several companies. Among them, the firm downgraded six offshore drillers:

  • Atwood Oceanics’ corporate family rating dropped to Caa1 from Ba3 with a negative outlook.
  • Diamond Offshore Drilling’s senior unsecured ratings dropped to Ba2 from Baa2 with a stable outlook.  
  • Ensco plc’s senior unsecured notes dropped to B1 from Baa2 with a stable outlook.
  • Noble Holding International’s senior unsecured ratings dropped to B1 from Baa3 with a stable outlook.
  • Rowan Companies’ senior unsecured ratings dropped to B1 from Baa3 with a stable outlook.
  • Transocean’s corporate family rating dropped to B2 from Ba2 with a stable outlook.

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