Corporate Credit Rating 2024 for DRILLMEC SPA: B1- (Downgrade)

modefinance published the Solicited Corporate Credit Rating of DRILLMEC S.P.A. on the website and the rating assigned to the entity is B1- (downgrade). The analysis revealed it is an adequate company with average capability of repaying financial obligations and it is little affected by adverse economic scenarios.

Drillmec is a long-standing global player in the Oil & Gas sector, dealing with the construction of drilling equipment and rigs in the onshore (core business) and offshore industries and offering aftersales, maintenance, and rehabilitation services. Since 2020, the Company has come under the control of Megha Engineering and Infrastructures Ltd (MEIL), a group that boasts a strong position in the EPC sector in India thanks to a track record in the execution of complex turnkey projects. Moreover, MEIL has a good financial risk profile and an order backlog that guarantees revenue visibility in the medium term.

Drillmec S.p.A.'s consolidated financial position was characterized by a balanced equity/liabilities ratio, limited debt to third parties, thanks to significant financial support from the direct parent company MEIL Global Holding BV, and adequate management of credit lines.
On the economic front, 2023 closed with a loss due to significant write-downs of receivables towards the former consolidated company Drillmec Russia, as well as penalties related to delays in the delivery of some drilling rigs. As a result, profitability indicators turned to negative and insufficient values, while the leverage indicator was adequate, although higher than the sector median. 

The company’s sales revenues improved by 31% compared to the previous year due to the expansion in the Americas, Middle East, and Asia. This resulted in a good dimensional positioning within the reference peer group, which presents satisfactory solvency, liquidity, and profitability indicators.

The governance and control system is well structured and includes a Board of Directors and a Board of Statutory Auditors, supported by a specialized company in charge of auditing the financial statements as well as by a collegial Supervisory Board. 

The Oil & Gas sector is affected by geopolitical tensions impacting prices and trade routes. The energy transition brings about challenges and opportunities for the future of this sector, leading to a concentration of investments (around USD 500 billion) on new exploration, Liquified Natural Gas export capacity, and development of low-carbon technologies such as carbon capture and green hydrogen. Drillmec S.p.a. has been investing in clean technologies through the start-ups Idrogena S.r.l. and Blu Vector S.r.l. set up in 2022.

Despite the slowdown in the manufacturing sector and a still restrictive monetary policy, world growth showed resilience in the second quarter of 2024 (+0.7%, a provisional figure that is slightly lower than the trend recorded in the first half of the year) and it should remain stable in the third quarter. Real-world GDP growth is estimated at 3.4 % in 2024 and 2025 while 3.3 % in 2026, showing a slight slowdown compared to the increase of 3.5 % recorded in 2023.

The present Corporate Credit rating is issued by modefinance under EU Regulation 1060/2009 and following amendments.

The present rating is solicited and is based on both private and public information. The rated entity and/or related third parties have provided all private information used. modefinance had access to some accounts and other relevant internal documents of the rated entity and/or related third parties. Solicited and unsolicited ratings issued by modefinance are of comparable quality, as the solicitation status has no effect on methodologies used. More comprehensive information on modefinance Corporate Credit Ratings are available at http://cra.modefinance.com/en

The present Corporate Credit Rating is issued on MORE Methodology 2.0 and Rating Methodology 1.0. A comprehensive description of both methodologies, as well as information on modefinance Rating Scale and Mappings, is available at http://cra.modefinance.com/en/methodologies.

For information on historical default rates of modefinance Corporate Credit Ratings please refer to ESMA Central Repository and ESMA European Rating Platform.

modefinance refers to default as a company under bankruptcy, or under liquidation status, or under administration or for which missed payments on a financial obligation are officially recorded.

The quality of the information available on the rated entity and used to determine the present rating was judged by modefinance as satisfactory. Please note that modefinance does not perform any audit activity and is not in a position to guarantee the accuracy of any information used and/or reported in the present document. As such, modefinance can accept no liability whatsoever for actions taken based on any information that may subsequently prove to be incorrect.

The present credit rating was notified to the rated entity in order to identify potential factual errors, as prescribed by the CRA Regulation.
No amendments were applied after the notification process.

The rated entity is  a buyer of ancillary services provided by modefinance (preliminary rating). modefinance ensures that such situation does not imply a conflict of interest in the issuance of the present credit rating.

The rating action issued by modefinance was performed independently. The analysts, members of the rating team involved in the process, modefinance Srl and its members and shareholders do not have any conflicts of interest in relation to the Rated Entity and/or Related Third Parties. If in the future a potential conflict of interest is identified in relation to the persons reported above, modefinance Ratings will provide the appropriate information and if necessary the rating will be withdrawn.

The present Credit Rating is an opinion of the general creditworthiness that modefinance issues on the rated entity, and should be relied upon to a limited degree. The issued rating is subject to an ongoing monitoring until withdrawal.

Head Analyst - Stefano Chirsich, Rating Analyst
stefano.chirsich@modefinance.com

Senior Assistant Analyst - Carmela Santomarco, Rating Analyst
carmela.santomarco@modefinance.com

Responsible for Rating Approval - Pinar Dilek, Rating Process Manager
pinar.dilek@modefinance.com