FREE MEMBERSHIP Includes » ABL Advisor eNews + iData Blasts | JOIN NOW ABLAdvisor Gray ABLAdvisor Blue
 
Skip Navigation LinksHome / Articles / Read Article

Print

Oilfield Services, Drilling Sector Faces High Refi Risk, Weak Access to Capital Markets

Date: Mar 20, 2020 @ 09:10 AM
Filed Under: Oil & Gas

In early 2020, North American OFS companies held about $32 billion of debt due to mature in 2020-24, just as the sector faces a further decline in activity and cash flow, Moody's Investors Service says in a new report. At the same time, weak earnings have constrained OFS companies' access to the capital markets, and the outbreak of coronavirus exacerbates their credit stress.

"The OFS sector's lack of pricing power or opportunity to improve equipment utilization leaves it more stressed for refinancing needs than either the E&P or the midstream sector, despite its smaller debt load," said Sreedhar Kona, a Moody's VP-Senior Analyst. "While the larger, investment-grade OFS firms are better equipped to withstand weakness in the sector, lower-rated and smaller companies face a high risk of default."

The OFS majors such as Schlumberger Ltd, Baker Hughes, a GE Company, LLC, Halliburton Company and National Oilwell Varco, Inc. have broad service offerings and wide geographical presence worldwide, while smaller, lower-rated OFS firms lack diversification and strong liquidity, Kona says. And speculative-grade firms account for about 65% of the $32.1 billion of OFS debt maturing through 2024.

Speculative-grade OFS companies holding Caa-rated debt have the highest near-term refinancing risk, though firms with B-rated debt also face constrained access to the capital markets in the absence of consolidation opportunities. Caa-rated OFS companies have about $3.8 billion of debt maturing by 2024 and B-rated land drillers, about $2.8 billion.

The 12 North American OFS companies with the largest maturities together account for $23 billion, or 73% of the OFS debt maturing through 2024, Moody's says. Schlumberger Ltd, Halliburton and Baker Hughes, which have about 45% of those maturities, have good capital market access. Speculative-grade firms with high near-term refinancing needs include Transocean Inc., with $4.3 billion in upcoming maturities, along with Valaris plc with $1.8 billion, Nabors Industries, Inc. with $1.4 billion and Superior Energy Services, Inc. with $1.3 billion.

Comments From Our Members

You must be an ABL Advisor member to post comments. Login or Join Now.