Fitch Ratings has upgraded
The upgrade followed the company's successful execution of its debt amendments through a Scheme of Arrangement, which effectively extended the maturities to 2022.
We view the debt restructuring as positive, allowing for sufficient liquidity headroom through 2022. However, the company's debt remains high and we expect its liquidity to be insufficient to cover debt amortisation in 2023, which, combined with uncertainty regarding access to capital markets, will result in the company running out of liquidity under our base-case forecasts.
While we expect some gradual recovery in the seismic market, the company's unsustainable debt level, short liquidity runway and minimal free cash flow (FCF) generation constrain the rating.
Fitch is withdrawing the ratings as PGS has chosen to stop participating in the rating process. Therefore, Fitch will no longer have sufficient information to maintain the ratings. Accordingly, Fitch will no longer provide ratings (or analytical coverage) for PGS.
KEY RATING DRIVERS
Restructuring Completed: In
High Refinancing Risk: We expect PGS to be able to meet contractual amortisation through 2022 under the new maturity schedule post-restructuring. However, based on our assumption of a very gradual recovery in the offshore seismic market, we expect FCF generation to be insufficient to cover the
Gradual Seismic Market Recovery: Despite the recent rapid recovery in oil and gas prices on the back of higher demand and favourable supply dynamics, we expect exploration budget cuts to only be reversed gradually. This is because oil producers will be cautious with ceding pricing concessions from service providers and will focus on core, rather than frontier, assets.
Weak FCF Generation: Even if the seismic services market recovers, as per our base-case forecast, we expect PGS's FCF generation will be less than
DERIVATION SUMMARY
Nabors' rating was upgraded to 'CCC+' in
KEY ASSUMPTIONS
Fitch's Key Assumptions Within its Rating Case for the Issuer
- Average of 5.75 vessels in 2021 (five active in 1Q21 and 4Q21, seven in 2Q21 and six in 3Q21), increasing to six in 2023
Vessel utilisation rate of 75% in 2021, increasing to 80% in 2023
EBITDA at almost
MultiClient library investment of
RATING SENSITIVITIES
Not applicable as the rating has been withdrawn.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
LIQUIDITY AND DEBT STRUCTURE
Liquidity Insufficient by End-2022: As of end 2020, PGS had
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
Following the withdrawal of PGS's rating, Fitch will no longer be providing the associated ESG Relevance Scores.
RATING ACTIONSENTITY/DEBT RATING PRIOR
PGS ASA LT IDR CCC Upgrade RD
LT IDR WD Withdrawn RD
VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
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