S&P downgrades oil services on financial worries

NEW YORK - Standard & Poor's Ratings Services cut its credit ratings or outlook on oil drilling and equipment companies Thursday, citing worry that some members of the sector will see results tumble in coming periods.

A downgrade or reduced outlook could raise a company's costs and hurt its ability to secure future financing.

"The rating actions reflect our expectation that financial performance and credit quality will deteriorate significantly, particularly for those companies exposed to land and shallow-water drilling activity," S&P said in a statement. "In addition, some issuers may bump up against covenants under their revolving credit facilities, which could restrict liquidity."

S&P cut its rating on Allis-Chalmers Energy Inc. to "B" from "B+" and kept a negative outlook. The rating is junk status.

"Lower profitability measures weigh on the company's covenants," the ratings agency said.

Elsewhere, S&P lowered its outlook on Hercules Offshore Inc. to negative from stable, but kept a "BB-" rating.

A negative outlook implies the company's rating could be reduced.

"Should operating performance continue to worsen ... a downgrade may be warranted," S&P said of Hercules.

Parker Drilling Co.'s outlook was cut to stable from positive, and its rating kept at "B+."

"Lower exploration and production spending by the industry could adversely affect Parker's rental tools business and the barge drilling business, which has already weakened considerably," the ratings agency said.

Stewart & Stevenson LLC's outlook was lowered to stable from positive with a "B" credit rating, with S&P warning low commodity prices could affect the company's 2009 results.

Global Geophysical Services Inc.'s outlook was cut to negative from developing with a "B-" rating.

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