S&P puts Frontier Drilling on watch

Standard & Poor's said it placed Frontier Drilling ASA's ratings, including the B- corporate credit rating, on CreditWatch with negative implications, reflecting concerns about the company's ability to fund its planned 2008 capital spending program.

The agency said that given project cost overruns beyond initial estimates and weaker-than-expected cash flow from operations, it believes that Frontier Drilling will need to raise additional capital over the near term, a risk heightened by a currently turbulent credit market.

Costs of upgrading and maintaining the company's drillships and delays in recontracting in early 2008 will likely cause cash flow from operations to fall short of projections, the agency predicted. If the company is unable to secure additional financing by June and successfully recontract its Southeast Asian unit at a favorable dayrate, S&P will likely downgrade Frontier Drilling to CCC+ and assign a developing outlook.

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