PRESS RELEASE: Fitch Affirms Halliburton's IDR at 'A-'; Outlook Stable

15th Jun 2010 22:47

The following is a press release from Fitch Ratings: Fitch Ratings-Chicago-15 June 2010: Fitch Ratings has affirmed Halliburton Company's (Halliburton; NYSE: HAL) Issuer Default Rating (IDR) at 'A-' despite potential exposure to the Macondo oil spill in the U.S. Gulf of Mexico. Fitch has affirmed the following ratings for Halliburton: --Issuer Default Rating (IDR) at 'A-'; --Senior unsecured notes/debentures at 'A-'; --Senior unsecured bank facility at 'A-'; --Short-term IDR at 'F2'; --Commercial paper at 'F2'. The Rating Outlook is Stable. Approximately $4.6 billion in total debt is affected. Today's rating affirmation reflects the fact that Halliburton is not expected to be exposed to the costs associated with the current BP oil spill in the U.S. Gulf of Mexico (GoM). Key to this assumption is the indemnification that the company has from BP combined with public disclosures about the course of events leading up to the accident which point to key decisions made by BP. Additionally, the deepwater U.S. GoM represents a relatively minor portion of the company's overall activity levels, and as a result, the current deepwater drilling moratorium is not expected to result in a material impact to the company's 2010 cash flows. Fitch will continue to monitor developments in the current environment for implications to Halliburton. Halliburton's ratings are supported by the company's leading position in the energy services sector, its geographic and operational diversity, and its strong credit profile. Offsetting factors include continued weak market conditions for drilling and service companies, the potential for a 'double-dip' recession and the resulting impact to commodity prices and drilling activity, the potential for increased leverage to fund acquisitions or capital expenditures, and significant off-balance-sheet obligations resulting in more modest adjusted credit metrics. For the quarter ending March 31, 2010, Halliburton generated latest 12 months' (LTM) EBITDA of approximately $2.8 billion and finished the period with debt of $4.6 billion. As a result, debt-to-EBITDA was 1.64 times (x) (2.7x using adjusted debt, which primarily includes 8x rental expense), with an interest coverage ratio of 8.65x. While credit metrics remain consistent with the current rating levels, Fitch expects metrics to weaken as Halliburton faces less robust market conditions throughout the remainder of 2010 compared to the prior year's levels. Beyond capital expenditures, the biggest other uses of cash will likely be M&A opportunities, the maturity of the company's $750 million of 5.5% senior notes due in October 2010, and annual dividend payouts of approximately $325 million. Halliburton remains focused on growing its global footprint via acquisitions targeted at niche technologies and/or acquisitions that increase the company's geographical footprint. Management has previously indicated that larger, consolidation-focused M&A could be considered. Liquidity remains strong at Halliburton and consists of cash and equivalents ($3.19 billion on March 31, 2010); its $1.2 billion credit facility (undrawn on March 31, 2010); and generation of operating cash flows ($2.34 billion for the LTM ending March 31, 2010). Current maturities include $750 million in 2010 (the 5.5% senior notes due in October 2010). The company's senior unsecured credit facility is currently undrawn and does not mature until July 2012. The company has no financial covenants in either the credit facility or any of its capital markets debt outstanding. Contact: Adam M. Miller +1-312-368-3113 or Sean T. Sexton, CFA +1-312-368-3130, Chicago. Media Relations: Cindy Stoller, New York, Tel: +1 212 908 0526, Email: [email protected]. Additional information is available at 'www.fitchratings.com'. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. (END) Dow Jones Newswires June 15, 2010 17:47 ET (21:47 GMT)