Oil Services & Drillers Brace For S&P Ratings Cut (ALY, HERO, PKD)

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Standard & Poor’s Ratings Services downgraded several oilfield services and drilling companies.  Among the companies the ratings agencies took action were Allis-Chalmers Energy Inc. (NYSE: ALY), Hercules Offshore Inc. (NASDAQ: HERO) and Parker Drilling Co. (NYSE: PKD).  The problem is that it does not stop here.  S&P said its review is not over and it expects more negative ratings actions over the coming days.

S&P expects thatfinancial performance and credit quality will deterioratesignificantly.  It lists those exposed to land and shallow waterdrilling activity and voices concern that some players may bump upagainst covenants governing their credit facilities. 

S&P expects meaningful cuts announced in North American explorationand production in 2009 and possibly 2010.  Below are the downgrades:

Downgraded                               To                From
Allis-Chalmers Energy Inc.
Corporate credit rating        B/Negative/–     B+/Negative/–
Outlook Action                           To                From
Hercules Offshore Inc.
Corporate credit rating        BB-/Negative/–   BB-/Stable/–
Parker Drilling Co.
Corporate credit rating        B+/Stable/–      B+/Positive/–
Stewart & Stevenson LLC
Corporate credit rating        B/Stable/–       B/Positive/–
Global Geophysical Services Inc.
Corporate credit rating        B-/Negative/–    B-/Developing/–

Jon C. Ogg
February 5, 2009