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COMMENTS

Issuer Ranking: Global Oilfield Services And Drilling Companies, Strongest To Weakest


Issuer Ranking: Global Oilfield Services And Drilling Companies, Strongest To Weakest

The following lists rank the global portfolio of oilfield services (OFS) and drilling companies that S&P Global Ratings rates, from strongest to weakest. We rank companies, in turn, by the rating, outlook, stand-alone credit profile (SACP), business and financial risk profile, and liquidity assessment. Investment-grade companies are ranked by business risk profile, then financial risk profile. Speculative-grade companies are ordered by financial risk profile, then business risk profile. Companies are then listed in alphabetical order, if not distinguished by these factors.

In line with our corporate rating methodology, the final rating may differ from the SACP, where group, government, or rating above the sovereign considerations apply. Where the SACP differs from the anchor, as it does for a third of the ratings, we have applied one or more modifiers, which may include that for liquidity. The anchor and active modifiers of each company are included in the tables below but do not influence the ranking. For our more-detailed analysis, please refer to the company-specific pages on RatingsDirect via the hyperlinks below.

Most of our business risk assessments are closely correlated with the corresponding competitive positions (see chart 3). Where they diverge, it is usually because we consider industry risk higher, and this constrains the competitive position. Government or group ownership is an explicit rating factor for only a few companies, resulting in a rating higher than the SACP.

For our sector outlooks and analysis, as well as ranking lists for other subsectors of oil and gas industry, please refer to Related Research below.

Ranking Table

Table 1

Oilfield Services, Drilling Companies – Investment Grade
Company FC LT Rating Outlook SACP Business risk Cash flow and leverage Liquidity Anchor Modifiers (active)

Schlumberger Ltd.

AA- Negative aa- [2] Strong [2] Modest Strong a+ CRA: Positive (+1 notch)

Baker Hughes A GE Company

A- Stable a- [2] Strong [2] Modest Exceptional a CRA: Negative (-1 notch)

Halliburton Co.

A- Stable a- [2] Strong [3] Intermediate Strong a-

National Oilwell Varco Inc.

BBB+ Stable bbb+ [3] Satisfactory [2] Modest Exceptional bbb+

TechnipFMC Plc

BBB+ Stable bbb+ [3] Satisfactory [2] Modest Exceptional bbb+

Helmerich & Payne Inc.

BBB+ Stable bbb+ [3] Satisfactory [2] Modest Strong bbb+

China Oilfield Services Ltd.

BBB Positive bb [3] Satisfactory [5] Aggressive Adequate bb

Patterson-UTI Energy, Inc.

BBB Stable bbb [3] Satisfactory [2] Modest Adequate bbb+ CRA: Negative (-1 notch)
Note: The scores are as of May 6, 2019. FC LT--Foreign currency long-term. CRA--Comparable ratings analysis. Source: S&P Global Ratings.

Table 2

Oilfield Services, Drilling Companies – Speculative Grade
Company FC LT Rating Outlook SACP Cash flow and leverage Business risk Liquidity Anchor Modifiers (active)

Eurasia Drilling Co.

BB+ Stable bb+ [2] Modest [5] Weak Adequate bb+

Oceaneering International Inc.

BB+ Negative bb+ [4] Significant [4] Fair Strong bb CRA: Positive (+1 notch)

Nabors Industries Ltd.

BB Stable bb [5] Aggressive [3] Satisfactory Adequate bb CRA: Negative (-1 notch)

Apergy Corporation

BB- Stable bb- [4] Significant [4] Fair Adequate bb

Precision Drilling Corp.

BB- Stable bb- [5] Aggressive [4] Fair Strong bb-

Ensign Drilling Inc.

BB- Stable bb- [5] Aggressive [4] Fair Adequate bb-

Keane Group Inc

B+ Stable b+ [4] Significant [6] Vulnerable Adequate b+

ADES International Holding PLC

B+ Stable b+ [5] Aggressive [5] Weak Adequate b+

Tervita Corp.

B+ Stable b+ [5] Aggressive [5] Weak Adequate b+

Stena AB

B+ Stable b+ [6] Highly leveraged [4] Fair Strong b Diversification: Moderate (+1 notch) Liquidity: Strong (+1 notch) CRA: Negative (-1 notch)

Superior Energy Services Inc.

B+ Negative b+ [5] Aggressive [5] Weak Adequate b+

North American Construction Group Ltd.

B Positive b [4] Significant [6] Vulnerable Adequate b+ CRA: Negative (-1 notch)

KLX Energy Services Holdings, Inc.

B Stable b [5] Aggressive [5] Weak Adequate b+ CRA: Negative (-1 notch)

Nine Energy Service, Inc.

B Stable b [5] Aggressive [5] Weak Adequate b+ CRA: Negative (-1 notch)

CES Energy Solutions Corp.

B Stable b [5] Aggressive [6] Vulnerable Adequate b

FTS International Inc.

B Stable b [5] Aggressive [6] Vulnerable Adequate b

Newpark Resources Inc.

B Stable b [5] Aggressive [6] Vulnerable Adequate b

Topaz Energy and Marine Ltd.

B Stable b [6] Highly leveraged [4] Fair Adequate b

Forum Energy Technologies, Inc.

B Stable b [6] Highly leveraged [5] Weak Strong b Liquidity: Strong (+1 notch) CRA: Negative (-1 notch)

Basic Energy Services Inc.

B Negative b [5] Aggressive [5] Weak Adequate b+ CRA: Negative (-1 notch)

Noble Corporation PLC

B Negative b [6] Highly leveraged [4] Fair Strong b Liquidity: Strong (+1 notch) CRA: Negative (-1 notch)

Western Energy Services Corp.

B Negative b [6] Highly leveraged [6] Vulnerable Adequate b- CRA: Positive (+1 notch)

Diamond Offshore Drilling Inc.

B Negative b- [6] Highly leveraged [5] Weak Strong b- Liquidity: Strong (+1 notch) CRA: Negative (-1 notch)

Calfrac Well Services Ltd.

B- Positive b- [6] Highly leveraged [5] Weak Adequate b CRA: Negative (-1 notch)

Ensco Rowan PLC

B- Stable b- [6] Highly leveraged [4] Fair Adequate b CRA: Negative (-1 notch)

KCA DEUTAG Alpha Ltd.

B- Stable b- [6] Highly leveraged [4] Fair Adequate b CRA: Negative (-1 notch)

Floatel International Ltd.

B- Stable b- [6] Highly leveraged [5] Weak Adequate b-

Shelf Drilling Holdings Ltd.

B- Stable b- [6] Highly leveraged [5] Weak Adequate b-

CGG

B- Stable b- [6] Highly leveraged [5] Weak Less than adequate b-

HGIM Corp.

B- Stable b- [6] Highly leveraged [5] Weak Weak b-

BEP Ulterra Holdings Inc.

B- Stable b- [6] Highly leveraged [6] Vulnerable Adequate b-

W3 Topco LLC

B- Stable b- [6] Highly leveraged [6] Vulnerable Adequate b-

Transocean Ltd.

B- Negative b- [6] Highly leveraged [4] Fair Adequate b CRA: Negative (-1 notch)

Era Group Inc.

B- Negative b- [6] Highly leveraged [5] Weak Adequate b-

Vallourec

B- Negative b- [6] Highly leveraged [5] Weak Adequate b-

Profrac Services, LLC

B- Negative b- [6] Highly leveraged [6] Vulnerable Less than adequate b-

SBP Holding LP

CCC+ Stable N/A [6] Highly leveraged [5] Weak Adequate N/A

Seadrill Partners LLC

CCC+ Stable N/A [6] Highly leveraged [5] Weak Adequate N/A

ION Geophysical Corp.

CCC+ Stable N/A [6] Highly leveraged [6] Vulnerable Adequate N/A

UTEX Industries Inc.

CCC+ Stable N/A [6] Highly leveraged [6] Vulnerable Adequate N/A

Vantage Drilling International

CCC+ Stable N/A [6] Highly leveraged [6] Vulnerable Adequate N/A

Pacific Drilling S.A.

CCC+ Negative N/A [6] Highly leveraged [6] Vulnerable Adequate N/A

Pioneer Energy Services Corp.

CCC+ Negative N/A [6] Highly leveraged [6] Vulnerable Adequate N/A

Abaco Energy Technologies LLC

CCC+ Negative N/A [6] Highly leveraged [6] Vulnerable Less than adequate N/A

Weatherford International plc

CCC Negative N/A [6] Highly leveraged [4] Fair N/A

Offshore Drilling Holding, S.A.

CCC- Negative N/A [6] Highly leveraged [6] Vulnerable Weak N/A
Note: The scores are as of May 6, 2019. FC LT--Foreign currency long-term. CRA--Comparable ratings analysis. Source: S&P Global Ratings.

The table and charts in this publication provide an overview of the 54 entities we rate in this industry. We rate eight entities as investment-grade ('BBB-' and above) and 46 entities as speculative-grade ('BB+' and below). This weighting to lower ratings highlights the subsector's exposures to business and financial stresses.

Chart 1

image

Across the corporate universe, 60% of our ratings are speculative-grade. Significantly, ratings below 'BB+' in OFS and drilling account for approximately 85%. The industry continues to experience pricing pressures and demand weakness as oil and gas exploration and production (E&P) companies (customers of oilfield service providers) have cut their drilling and service spending since the oil price decline of 2014-2015. This resulted in many OFS and drilling companies running with higher financial leverage.

Chart 2

image

Our outlooks on the ratings within the sector are most often stable, but currently almost a third are negative. Despite more supportive oil market fundamentals and healthy oil prices, OFS companies continue to face challenges recapturing their pre-oil collapse margins. Although we note that market activity has picked up since bottom of the cycle in 2016, higher volumes and prices are still not sufficient to garner adequate rates of return and healthy credit ratios.

We expect E&P capital spending growth to be limited in 2019, as they focus on spending discipline and returning capital to shareholders. In our view, this will continue to result in excess capacity in OFS and drilling, putting pressure on margins in 2019. In the U.S., the slowdown in completion activity in the Permian, which is likely to continue until transportation constraints are resolved from the second half of 2019, will also limit margin upside. On the cost side, we expect OFS companies to be able to largely pass through increased prices for material such as steel (due to tariffs) and sand (due to supply and logistics issues) to customers. Increased labor costs due to the tight U.S. market will likely be borne by service providers. Internationally, we expect stronger growth and less dynamic supply to give OFS providers a little more pricing power.

Our business risk profile assessments typically mirror our view of competitive position in this sector (see chart 3). Where they diverge, it is usually because we consider the underlying industry risk higher, and this constrains the final business risk assessment.

Chart 3

image

Chart 4

image

The most common financial risk profile assessments in this sector is highly leveraged (see chart 4). Despite reduced capital expenditures and recent pickup in activity, continued pricing pressure limits free cash flow generation and prevents rapid deleveraging in the sector. We expect median debt to EBITDA to remain high at more than 4.0x over 2019-2020, down from more than 5.0x in 2018.

Chart 5

image

We consider most OFS and drilling issuers to have liquidity that is adequate or better (see chart 5). Despite significant amounts of debt, the sector does not have substantial short-term maturities. Several companies also have gone through bankruptcies, shifting debt maturities further. Therefore, typically, the amount of cash OFS and drilling companies maintain, combined with their cash generation and liquidity resources, will cover the uses of cash to which they have committed over the next 12 months by 1.2x or more. For a third of these ratings, we use comparable rating analysis to finetune the outcome. In this sector, the modifier is most often negative, resulting in a rating one notch below the anchor.

The ratings and scores in this document are as of May 6, 2019, and we will not keep it updated. To keep it concise, the list only discloses scores for the main rated entity of larger corporate groups. We may omit certain entities, such as subsidiaries or holding companies, where the ratings are linked to those on their parent companies.

image

Related Criteria

  • Rating Government-Related Entities: Methodology And Assumptions, March 25, 2015
  • Key Credit Factors For The Oilfield Services And Equipment Industry, April 17, 2014
  • Key Credit Factors For The Contract Drilling Industry, April 17, 2014
  • Corporate Methodology, Nov. 19, 2013
  • Group Rating Methodology, Nov. 19, 2013
  • Ratings Above The Sovereign--Corporate And Government Ratings: Methodology And Assumptions, Nov. 19, 2013

Related Research

  • North American Midstream Companies, Strongest To Weakest, May 2, 2019
  • S&P Global Ratings Publishes Updated Global And Regional Corporate Rating Component Scores Reports, April 26, 2019
  • WTI Crude Oil Price Assumptions For 2019 And 2020 Raised To $55 Per Barrel, April 22, 2019
  • Global Oil Refining And Marketing Companies, Strongest To Weakest, March 8, 2019
  • Turning tides: The future of fuel oil after IMO 2020; S&P Global Platts (https://s3-ap-southeast-1.amazonaws.com/sp-platts/IMO_20190207.pdf)
  • Country Risk Assessments Update: February 2019, Feb. 18, 2019
  • Global Metals & Mining Companies, Strongest To Weakest, Jan. 29, 2019
  • Industry Top Trends 2019: Oil And Gas, Nov. 12, 2018
  • FAQ: How S&P Global Ratings Formulates, Uses, And Reviews Commodity Price Assumptions, Sept. 28, 2018
  • Industry Risk Assessments Update: May 2018, May 4, 2018

This report does not constitute a rating action.

Primary Credit Analysts:Ivan Tiutiunnikov, London + 44 20 7176 3922;
ivan.tiutiunnikov@spglobal.com
Simon Redmond, London (44) 20-7176-3683;
simon.redmond@spglobal.com
Secondary Contacts:Thomas A Watters, New York (1) 212-438-7818;
thomas.watters@spglobal.com
Carin Dehne-Kiley, CFA, New York (1) 212-438-1092;
carin.dehne-kiley@spglobal.com
Paul B Harvey, New York (1) 212-438-7696;
paul.harvey@spglobal.com
Ben B Tsocanos, New York (1) 212-438-5014;
ben.tsocanos@spglobal.com
Alexander Griaznov, Moscow (7) 495-783-4109;
alexander.griaznov@spglobal.com
Danny Huang, Hong Kong (852) 2532-8078;
danny.huang@spglobal.com
Fabiola Ortiz, Mexico City (52) 55-5081-4449;
fabiola.ortiz@spglobal.com

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