Though the credit ratings for companies in the oilfield-service sector have remained stable, soft natural gas prices and growing cost structures remain viable concerns, according to Jeff Morrison, an analyst with Standard & Poor's Corp. Of the bulk of the service companies in the credit-rating agency's universe, most currently hold a B+ to BB- credit rating. In the first half of 2006, S&P's credit-ratings upgrades for the service sector outpaced downgrades five-to-two. For those that slipped, Morrison says M&A activity was to blame, not operating performance. For example, Compagnie Generale de Geophysique's plan to buy Veritas resulted in a negative CreditWatch listing for both companies. But such deals were atypical in 2006. "2006 (was) fairly quiet in terms of large-scale M&A activity in the oilfield-services sector," Morrison told attendees at an S&P oil and gas conference in Houston recently. "Most have been relatively small, bolt-on acquisitions to augment existing product lines or to add products and technology." For more on this, see the February issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

Comments