Moody's may downgrade Ensco

Moody's Investors Service said it placed Ensco plc's ratings under review for downgrade following news that it will acquire Rowan Cos, Inc. in an all-stock transaction Oct. 8.

The ratings under review include its B2 corporate family rating, B2-PD probability of default rating, B3 senior unsecured notes rating and not-prime commercial-paper rating.

Moody's also said it affirmed Rowan's B3 corporate family rating, B3-PD probability of default rating and Caa1 senior unsecured notes rating.

Ensco's SGL-1 speculative grade liquidity rating and Rowan's SGL-1 speculative grade liquidity rating are unchanged.

The agency also revised the outlook to developing from negative.

While the combination will significantly improve Ensco's business risk profile, fleet quality and re-contracting prospects, leverage metrics for the combined company will remain very high and weaken further in 2019 from ongoing contract expirations through early 2020, Moody's said.

Higher oil prices should boost offshore upstream activity and rig demand in 2019, the agency said, but dayrates are expected to recover gradually and remain low, which will challenge Ensco to reverse the declining trends in earnings and cash flow before 2020.

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