uploads/2017/03/credit-rating-1.jpg

Analyzing the Credit Rating Downgrades of Offshore Drillers

By

Updated

Credit ratings

Credit ratings can change over time, just as industry outlooks and companies change. 

However, investors should remember that changes in credit ratings can lag behind shifts in the market, meaning that credit ratings can confirm risks associated with a company but not predict those risks in advance.

Article continues below advertisement

Ratings downgrades by Moody’s

In February 2016, Moody’s downgraded Noble (NE) to a Baa3 rating from a B1 rating. It downgraded Seadrill Partners (SDLP) by three notches to Caa2.

In July 2016, Moody’s downgraded Transocean’s (RIG) senior note rating to a Caa1 from a B2.

In February 2016, Moody’s downgraded Atwood Oceanics (ATW) to a Caa1 rating from a Ba3 rating and gave a negative outlook on the stock. It also downgraded Diamond Offshore Drilling (DO) to a Ba2 rating from a Baa2 rating and gave a stable outlook on the stock. 

Rowan Companies’ (RDC) credit rating was reduced to a B1 from a Baa3, and it was given a stable outlook. Ensco (ESV) was downgraded to a B1 rating from a Baa2 rating and was also given a stable outlook.

Rating downgrades by S&P

In October 2016, Standard & Poor’s (or S&P) downgraded Seadrill Partners (SDLP) to a CCC+ rating from a B- rating and gave the stock a negative outlook.

S&P downgraded Rowan Companies stock to a B+ rating from a BBB rating and gave it a stable outlook. B+ is the lowest investment-grade rating. The rating signifies a moderate chance of default.

S&P revised Diamond Offshore Drilling’s credit rating to a BB- from a BBB and gave a negative outlook on the stock. BB- signifies a non–investment-grade, or highly speculative, investment.

In November 2016, S&P downgraded the credit rating for Pacific Drilling (PACD) to a CCC- from a CCC+ and assigned it a negative outlook. CCC- signifies a non–investment-grade rating, or a junk bond rating.

Advertisement

More From Market Realist