By Victoria Stilwell
Moody's Investors Service upgraded Diamond Offshore Drilling
Inc.'s (DO) ratings by one notch on the contract driller's lower
debt levels relative to its industry peers even as it funds fleet
expansion.
The credit-ratings company now has Diamond Offshore as A3,
satisfactory credit quality four notches above junk territory. The
outlook is stable.
Moody's said the ratings reflects the company's strong market
position with a large offshore-drilling fleet. The ratings firm
said Diamond will have a competitive ultradeepwater- and
deepwater-drilling-rig fleet upon completion of its new drill
ships.
Although Diamond's fleet will be somewhat smaller than those of
its peers ENSCO PLC (ESV) and Noble Corp. (NE), Moody's said it
expects Diamond's peak debt levels to be significantly lower than
the current debt levels of those companies.
Moody's said Diamond's ratings are unlikely to be upgraded
further in the medium term because of expected deterioration in its
leverage metrics as the company funds new drill ships that are
under construction.
A downgrade could be possible if the company makes debt-funded
acquisitions or if additional new rig construction increases
leverage more than anticipated.
Diamond in April reported its first-quarter earnings slid 26% as
the contract driller was hit with higher costs. The company is
majority owned by Loews Corp. (L).
Shares of Diamond slipped 2.4% to $57.51 amid a broad market
decline Thursday.
Write to Victoria Stilwell at victoria.stilwell@dowjones.com