Moody's may lower Calfrac Well Services

Moody's Investors Service said it placed Calfrac Well Services Ltd.'s Ba3 corporate family rating, Ba3 probability of default rating and B1 senior unsecured notes rating under review for possible downgrade.

Moody's said it also lowered Calfrac's speculative-grade liquidity rating to SGL-3 from SGL-2.

The review is prompted by Calfrac's announcement that it has agreed to acquire Century Oilfield Services Inc. for $90 million in cash and equity and the assumption of about $30 million of Century's existing debt and other liabilities. Closing is expected in November.

The cash portion of the purchase price will be financed with drawings under Calfrac's revolver. This acquisition follows the $42.8 million Pure Energy Services Ltd. acquisition in August, which was principally financed with revolver debt.

While the acquisitions of Century and Pure's assets will expand Calfrac's asset base and could lead to future earnings and cash flow growth opportunities, associated leverage will rise significantly over the near term as debt increases by about $90 million in a weak market for well completion services in North America, the agency said.

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