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Gold/Mining/Energy : DAILEY PETROLEUM (DALY) -- Ignore unavailable to you. Want to Upgrade?

To: tom clewett who wrote (15)	8/20/1998 2:55:00 PM
From: Robert Floyd	Respond to of 23

Dailey International's Ratings Lowered to 'B-' by Standard & Poor's NEW YORK, Aug. 20 /PRNewswire/ -- Standard & Poor's today lowered its corporate credit and senior debt ratings on Dailey International Inc. to single-'B'-minus from single-'B'. The outlook is now negative. About $275 million in rated debt securities are affected. The downgrade follows the announcement of the resignation of Dailey's president and CEO and two quarters of poor financial results. In early 1998 Dailey completed three debt-financed acquisitions and increased staffing levels in preparation for expected growth. However, with low oil prices and a decreased drilling rig count, Dailey encountered a sharp downturn in demand. Margins have compressed dramatically. Dailey has two core businesses, both in oilfield services. In one segment -- rental of specialized downhole tools used in directional drilling -- Dailey is a leading supplier, but demand depends heavily on drilling activity. In the other segment -- directional and air drilling services -- long-term growth prospects are good, but Dailey must compete with larger, entrenched competition. Under a newly appointed interim chief executive, Dailey will likely chart a new strategic direction involving an end to the aggressive debt-financed growth plan and concentration on conserving cash. Capital expenditures could be reduced significantly. Total debt of $275 million represents a severe burden given deflated expectations for revenue and cash flow. While Dailey has no bank credit line, short-term liquidity is not a concern since Dailey has cash balances in excess of $50 million, which equals about two years of interest expense. Earnings before interest, taxes, depreciation, and amortization (EBITDA) for the first six months of 1998 was $14.4 million, indicating very weak annualized EBITDA interest coverage ratio of 1.1 times (x). OUTLOOK: NEGATIVE The negative outlook represents the potential for further deterioration in business prospects over the next few years. In addition, Dailey may not derive the expected benefits of its recent acquisitions. Dailey's competitors, particularly in drilling services, are financially stronger and better suited to offer lower prices if that becomes necessary to win new contracts. -- CreditWire SOURCE: Standard & Poor's CreditWire