Fitch Ratings Affs Smith International's Unsecured Rtg At 'BBB+'.Business Editors CHICAGO--(BUSINESS WIRE)--Feb. 25, 2002 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. affirms Smith International, Inc. (Smith) unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. rating at 'BBB+'. The Rating Outlook is changed to Stable from Positive. Smith's current credit statistics remain strong for the rating despite the recent downward trend of crude oil and natural gas prices from above average prices since the middle of 2001 to what is considered to be historical norms. Fitch fitch: see polecat. expects EBITDA/interest for 2001 to be 10.6 times (x) and debt/EBITDA to be 1.4x. Revenues in 2001 from workovers, drill bits, fluids, and oil field equipment have improved on a quarter-by-quarter and year-over-year basis. This is due primarily to Smith's geographical diversity. International sales have helped protect the company from being significantly impacted by the downturn to historical average commodity prices. Offsetting factors include the highly cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. nature of the industry, a weak pricing environment and Smith's acquisitive nature. Smith has grown from roughly $1.2 billion in 1996 to $3.6 billion in 2001. While growth has been both organic and through acquisitions, since 1993 Smith has made more than 50 acquisitions with 80% of them in a down market. The majority of these acquisitions have been small niche players but some have been over $100 million. Fitch expects acquisitions to continue and has factored this into the rating. The long-term outlook for exploration and production activity is favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. based upon expected growth in worldwide energy consumption. However, the decline of both natural gas (14%) and crude oil prices (24%) in the last quarter has significantly reduced drilling activity. Therefore, the near-term outlook indicates that service companies will report weaker results for the next several quarters. However, companies that have diversified diversified (di·verˑ·s geographic operations such as Smith should fare better due to the stability of the international markets thus far. Smith International, Inc. is a leading worldwide supplier of premium products and services to the oil and gas exploration and production industry, the petrochemical petrochemical, any one of a large group of chemicals derived from a component of petroleum or natural gas. The cracking processes for manufacturing gasoline produce vast quantities of gaseous hydrocarbons. industry and other industrial markets through its four principal business units - M-I, Smith Bits, Smith Services, and Wilson. |
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion