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S&P places EDC 'BB' rating on CreditWatch positive on potential Schlumberger takeover

July 28, 2017, 1:40 UTC+3 MOSCOW

Previously, S&P had a stable outlook for the company's rating

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MOSCOW, July 28. /TASS/. S&P Global Ratings placed its 'BB' long-term corporate credit rating on Russia-based oilfield services (drilling) company Eurasia Drilling Co. (EDC) on CreditWatch with positive implications on Thursday. The move follows Schlumberger's announcement that it has agreed to acquire 51% of EDC, subject to various regulatory approvals.

"If the transaction proceeds, we would likely upgrade EDC, based on our view that its credit profile would be strengthened by ownership by the world's largest oilfield services company," the rating agency said.

Previously, S&P had a stable outlook for the company's rating.

As reported earlier Russia’s Federal Antimonopoly Service (FAS) received a petition from Russian Direct Investment Fund (RDIF), Russia-China Investment Fund (RCIF) and Middle Eastern investors to purchase a stake in Eurasia Drilling.

In July, 2017 Schlumberger and the management of Eurasia Drilling signed a preliminary agreement on sale of a 51% stake in EDC to Schlumberger. The sides said then that they are expecting a final decision from Russia’s monopoly regulator.

Eurasia Drilling Company was established on the basis of oilfield services assets of Russia’s largest independent crude producer Lukoil. These assets were purchased in 2004 by companies of Russian businessman Alexander Dzhaparidze. Currently, the largest co-owners of Eurasia Drilling are Alexander Dzhaparidze with a 30.63% stake (he is also the general director) and Alexander Putilov with 22.4%. Other shareholders include various international and domestic funds.

This is the second attempt of Schlumberger to acquire a stake in the Russian company’s capital as in early 2015 it announced an intention to purchase a 45.65% stake in EDC for $1.7 bln. The agreement the companies entered also stipulated an option to acquire the remaining shares in EDC within a five-year period after the completion of the potential transaction. However, the deal fell through, as Russian officials were opposed to foreign investors entering the capital of a Russian service company amid western sanctions. In September 2015, it was announced that the transaction would not take place.

"Although we do not have any information regarding the receipt of any preliminary approvals, we think there is a higher likelihood of the transaction closing this time. At the same time, we note that a consortium led by the Russian Fund of Direct Investments and the Russia-China Investment Fund has reportedly also filed a similar acquisition request with the Federal Antimonopoly Service, which creates uncertainty about EDC's future shareholding structure," S&P said.

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