Credit Risk Methodology

Transcription

1 Credit Risk Methodology Understanding Rated And Unrated Counterparties Evaluate and develop an understanding of the methodology used for rated and unrated counterparties. Thomas Watters Managing Director, Corporate Ratings S&P Global Ratings Jim Elder Director, Risk Services S&P Global Market Intelligence October 3, 2017

2 OPEC Have They Been Successful? Thomas Watters Managing Director Corporate Ratings, Oil And Gas S&P Global Ratings October 3, 2017 the prior written approval of S&P Global. Not for distribution to the public. Copyright 2017 by S&P Global. All rights reserved.

3 Crude Oil Spot Price (2014 YTD 2017) $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 Kurds release 400,000 barrels Libyan production increase U.S. dollar begins to strengthen November OPEC Canada/Nigeria Production Outages OPEC announces production cut Accord(in principal) to lift Iranian Sanctions Roll over of production cuts to April 1, 2018 WTI Spot Brent Spot Source: EIA and Bloomberg. the prior written approval of S&P Global. Not for distribution to the public. 3

4 Non-OPEC KBD Was OPEC s Strategy Effective? 58.5 Non OPEC/OPEC Supply OPEC KBD OPEC Non-OPEC Source: IEA. the prior written approval of S&P Global. Not for distribution to the public. 4

5 Thousand barrels per day U.S. Production Trends 10,000 Niobrara Bakken Eagle Ford Permian Total U.S. Oil production 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - Source: EIA. the prior written approval of S&P Global. Not for distribution to the public. 5

6 Days Drill Times Have Dropped Significantly Over The Years Days to Drill Anadarko Permian Delaware Permian Midland Denver-Julesburg Eagle Ford Williston Source: Platts Analytics Bentek Products. For illustrative purposes. the prior written approval of S&P Global. Not for distribution to the public. 6

7 % of Production WTI Oil Breakevens Oil Breakeven analysis assumes: Natural Gas remain locked in at current 12-month forward curve prices The relationship between the NGL and Oil prices are held constant when calculating the oil breakeven price Breakeven analysis assumes a 10% discount rate 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Oil % Gas % NGLs % Oil Breakeven Price ($/b) $55.00 $50.00 $45.00 $40.00 $35.00 $30.00 Oil Breakeven Price ($/b) Source: Platts Analytics Bentek Products. For illustrative purposes. the prior written approval of S&P Global. Not for distribution to the public. 7

8 IRR IRR Sensitivity To WTI WTI Sensitivity: Analysis based on fluctuating WTI prices while regional oil differentials are locked in at current spreads Natural gas remain at current 12-month forward curve prices for their respective regions $70 WTI $60 WTI $50 WTI $40 WTI 60% 50% 40% 30% 20% 10% 0% Source: Platts Analytics Bentek Products. For illustrative purposes. the prior written approval of S&P Global. Not for distribution to the public. 8

9 MMb/d More Than 75% Of Onshore U.S. Production Has A Half-Cycle IRR Above 10% At $50/Bbl WTI U.S. Production Offshore Onshore - Other Permian Bakken DJ Eagle Ford Anadarko - OK Powder River Source: Platts Analytics Bentek Products. For illustrative purposes. the prior written approval of S&P Global. Not for distribution to the public. 9

10 OPEC s New Target Rising Global Inventories Source: IEA. the prior written approval of S&P Global. Not for distribution to the public. 10

11 OPEC Production Cuts On Global Oil Stocks Source: IEA. the prior written approval of S&P Global. Not for distribution to the public. 11

12 U.S. Commercial Crude Oil Stocks Source: U.S. Energy Information Administration. the prior written approval of S&P Global. Not for distribution to the public. 12

13 NYMEX/WTI Futures Source: Bloomberg.

14 Outlook For Natural Gas

15 Billion Cubic Feet Per Day Dry Gas Production Growth By Region Rest of US 'shale' Antrim (MI, IN & OH) Bakken (ND & MT) Woodford (OK) Barnett (TX) Fayetteville (AR) Eagle Ford (TX) Marcellus (PA, WV, OH & NY) Haynesville (LA & TX) Utica (OH, PA & WV) Permian (TX & NM) Source: EIA. the prior written approval of S&P Global. Not for distribution to the public. 15

16 Bcf/d Outside Of Northeast, Permian Primary Growth Play Natural Gas Production Forecast Breakout 90 Northeast Permian Rest of US Associated Gas Rest of US Dry Gas Source: Platts Analytics Bentek Products. the prior written approval of S&P Global. Not for distribution to the public. 16

17 1/1/2010 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019 1/1/2020 MMcf/d Mcf/d Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 WTI Price ($/b) Mcf/d Ramping Up The Permian Permian Rigs vs. WTI Midland Basin Type Curves WTI Price Active Rigs Horizontal Rigs 3,000 2,000 1, Permian Projection Delaware Basin Type Curves 10,000 8,000 3, ,000 4,000 2,000 2, , Source: Platts RigData. the prior written approval of S&P Global. Not for distribution to the public. 17

18 Mcf/d Mcf/d Mcf/d Mcf/d Breaking Down The Northeast Utica Wet Utica Dry 15, , ,000 10,000 5,000 5, Months Months Marcellus Wet Marcellus Dry 15, , ,000 10,000 5,000 5, Months Months Source: Platts RigData. the prior written approval of S&P Global. Not for distribution to the public. 18

19 1/1/ /1/2013 7/1/2014 4/1/2015 1/1/ /1/2016 7/1/2017 4/1/2018 1/1/ /1/2019 7/1/2020 4/1/2021 MMcf/d Rigs Mcf/d Haynesville Staging A Comeback? Haynesville Rigs Haynesville Type Curves Directional Horizontal Vertical , , /2/2015 1/2/2016 1/2/2017 8,000 4, Months Haynesville Projection 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Source: Platts RigData. the prior written approval of S&P Global. Not for distribution to the public. 19

20 % of Production Wellhead GAS Breakevens Gas Breakeven analysis assumes: Oil and NGLs remain locked in at current 12-month forward curve prices Breakeven analysis assumes a 10% discount rate Half-cycle analysis assumes exploration & land acquisition expenses are sunk costs Oil % Gas % NGLs % Gas BE ($/Mcf) 100% $ % 80% 70% 60% 50% 40% 30% 20% 10% $3.50 $3.00 $2.50 $2.00 $1.50 Gas Breakeven Price ($/Mcf) 0% $1.00 Source: Platts Analytics Bentek Products. the prior written approval of S&P Global. Not for distribution to the public. 20

21 IRR IRR Sensitivity To Henry Hub Henry Hub Sensitivity: Natural gas is based on Henry Hub at various prices +/- current regional differentials Oil and NGL prices remain at current 12-month forward curve prices for their respective regions 45% 35% Support U.S. Production in Weak Price Environment $2.50 HH $3.00 HH $4.00 HH Higher Pricing Drives Dry Gas Growth 25% 15% 5% -5% -15% Low Gas Price Sensitivity High Gas Price Sensitivity Source: Platts Analytics Bentek Products. the prior written approval of S&P Global. Not for distribution to the public. 21

22 Bcf/d New Pipeline Capacity Likely To Be Underutilized Northeast infrastructure and rig scenarios 45 Northeast Production Takeaway Cellcast Forecast Exiting 27.3 Bcf/d (+3 Bcf/d from August levels) +1.1 Bcf/d MoM Source: Platts Analytics Bentek Products. the prior written approval of S&P Global. Not for distribution to the public. 22

23 What Does The Future s Strip Price Indicate For Regional Basis? the prior written approval of S&P Global. Not for distribution to the public. 23

24 Henry Hub Futures Curve $4.00 Prompt $3.50 $3.00 $2.50 $2.00 Source: CME Group. the prior written approval of S&P Global. Not for distribution to the public. 24

25 Is There Hope For The Offshore Drillers?

26 Floater And Jack-Up Utilization, YTD Drillships Semi-Submersibles Jackups 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: RigLogix and S&P Global. For illustrative purposes only. the prior written approval of S&P Global. Not for distribution to the public. 26

27 Floater And Jack-Up Dayrates, YTD 600,000 Drillships Semi-Submersibles Jackups 500, , , , , Source: RigLogix and S&P Global. For illustrative purposes only. the prior written approval of S&P Global. Not for distribution to the public. 27

28 Floater Supply/Demand Outlook Contracted Rigs 10% Demand Growth Total rigs Source: RigLogix, S&P Global estimates. For illustrative purposes only. the prior written approval of S&P Global. Not for distribution to the public. 28

29 Jack-Up Supply/Demand Outlook Contracted Rigs 10% Demand Growth Total Rigs Source: RigLogix, S&P Global estimates. For illustrative purposes only. the prior written approval of S&P Global. Not for distribution to the public. 29

30 Credit Outlook

31 The Corporate Ratings Criteria Framework the prior written approval of S&P Global. Not for distribution to the public. 31

32 Competitive Position-Key Credit Factors For E&P Competitive Advantage(10%) Scale, Scope, Diversity (55%) Operating Efficiency (35%) Profitability Growth prospects in its acreage Size of reserves Unit cash costs and F&D ROC Mix of liquids vs. gas Mix Unit cash margin relative to F&D EBI/unit Unit revenues at each producing regions Operational risk Revenue per unit relative to leveraged costs EBI margin Extent of any vertical integration Geographic diversification Production and growth prospects the prior written approval of S&P Global. Not for distribution to the public. 32

33 Cash Flow/Leverage (CFL) Industry Key Credit Factor commentaries may identify additional supplemental ratio(s). the prior written approval of S&P Global. Not for distribution to the public. 33

34 U.S. Oil And Gas Industry Distribution Exploration and Production Oilfield Service Contract Drillers 6% 24% 70% Source: S&P Global Ratings. the prior written approval of S&P Global. Not for distribution to the public. 34

35 U.S. Oil And Gas Ratings And Outlook Distribution Ratings Distribution Total 116 Companies AA A BBB BB B CCC D Outlook/Credit Watch Distribution Total 116 Companies Positive Negative Stable WatchPos WatchNeg NM 18% 1% 5% 2% 17% 49% 3% 1% 1% 6% 14% 43% 40% Source: S&P Global Ratings. the prior written approval of S&P Global. Not for distribution to the public. 35

36 Exploration And Production Ratings Distribution Outlook/Credit Watch Distribution Positive Negative Stable WatchPos NM 2% 1% 9% % AAA AA A BBB BB B CCC D 58% Source: S&P Global Ratings. the prior written approval of S&P Global. Not for distribution to the public. 36

37 Oilfield Service Ratings Distribution Outlook/Credit Watch Distribution Negative Stable WatchPos 4% % % AAA AA A BBB BB B CCC D Source: S&P Global Ratings. the prior written approval of S&P Global. Not for distribution to the public. 37

38 Contract Drillers Ratings Distribution Outlook/CreditWatch Distribution Negative Stable WatchPos WatchNeg 13% % % 62% AAA AA A BBB BB B CCC D Source: S&P Global Ratings. the prior written approval of S&P Global. Not for distribution to the public. 38

39 Quarterly Rating Actions (Global) For The Oil And Gas Sector (count) 20 Oil And Gas Sector Rating Actions (Global) E&P Integrated Oil & Gas Oilfield Services & Equipment Contract Drilling Source: S&P Global Fixed Income Research, as of September 13, the prior written approval of S&P Global. Not for distribution to the public. 39

40 Schedule Of Maturing Rated Debt Oil And Gas (Bil. $) Investment grade Total US Europe Other Developed Emerging Markets Investment grade total Speculative grade US Europe Other Developed Emerging Markets Speculative grade total Totals US Europe Other Developed Emerging Markets Total Oil and Gas Includes both integrated oil and gas, and oil and gas exploration and production sectors. Data as of Source: S&P Global Fixed Income Research. Includes both integrated June oil 30, and gas, and oil Includes and gas exploration bonds, and production loans, sectors. and Data revolving as of June 30, credit Includes facilities bonds, loans, that and are revolving rated credit by facilities S&P that Global are rated by S&P Global Ratings Ratings. Source: S&P Global Fixed Income Research the prior written approval of S&P Global. Not for distribution to the public. 40

41 Speculative-Grade Bond Yields Speculative Grade Bond Yields (%) 30.0 Oil and Gas 5-Year Yield Speculative-Grade 5-Year Yield /1/2014 3/1/2015 9/1/2015 3/1/2016 9/1/2016 3/1/2017 9/1/2017 Note: Credit Spreads for U.S. corporate speculative-grade bonds with a five-year maturity, calculated as a composite. Data as of Sep 12, 2017 Source: S&P Global Fixed Income Research. Source: S&P Global Fixed Income Research, as of September 12, Note: Credit Spreads for U.S. corporate speculative-grade bonds with a five-year maturity, calculated as a composite. the prior written approval of S&P Global. Not for distribution to the public. 41

42 Credit Risk Methodology Understanding Unrated Counterparties Jim Elder Director, Risk Services S&P Global Market Intelligence October 3, 2017 the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. Copyright 2017 by S&P Global Market Intelligence. All rights reserved.

43 S&P Global Organizational Structure F I R E W A L L the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. 43

44 The Counterparty Risk Problem Most Counterparties Are Not Rated Or Publicly Traded Rated Companies: Ratings, Research and Financial data ~4,200 Financials and ~5,200 corporations Public Companies: Financial data + Pricing indicators ~60,000 companies Private Companies: Information scarcity ~50,000 banks and millions of corporations Source: S&P Capital IQ Platform, an offering of S&P Global Market Intelligence, as of October 3, the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. 44

45 Unrated Companies Are Typically Riskier Distributions Of Credit Quality In The Capital Good Sector, By Company Type 16% 14% 12% 10% 8% 6% 4% 2% 0% Rated Unrated Source: S&P Capital IQ Platform, an offering of S&P Global Market Intelligence, as of September 20, Credit quality of unrated firms ( Credit Score ) is determined by converting PD Fundamental One-Year Probability of Default to historical default rates of rated companies. Chart depicts 2,946 companies within the energy sector. Lowercase nomenclature is used to differentiate S&P Global Market Intelligence PD credit model scores from the credit ratings issued by S&P Global Ratings. the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. 45

46 Private Companies Present Unique Challenges 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Count of Exposures >1, , <100 Profile of Counterparty Exposures 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Private/Public Exposure % Private % Public 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Size of Counterparty ($Rev) 1bn+ 101m- 1bn m <25m Issues Most Frequently Identified By Risk Teams: 1. Time requirements 2. Data scarcity 3. Volume of counterparties (workflow) Source: S&P Capital IQ Counterparty Risk Assessment Product Roadmap Survey, non-financial corporation respondents, an offering of S&P Global Market Intelligence. As of March 13, the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. 46

47 Credit Spectrum Increased Stability Early Warning Credit Ratings CreditModel PD Model Fundamentals PD Model Market Signals Financial and Qualitative Factors Quantitative: Calibrated on Ratings Quantitative: Calibrated on Defaults Quantitative: Based on Stock Price Volatility Complete Global and Sector Coverage Private and Public Corporates and FI s Private and Public Corporates and Banks Public Companies the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. 47

48 Probability of Default (PD) Default Risk By Industry One-Year Median Probability Of Default 18% Oil & Gas Drilling Oil & Gas Equipment & Services Integrated Oil & Gas Oil & Gas Exploration & Production Oil & Gas Refining & Marketing Oil & Gas Storage & Transportation Coal & Consumable Fuels Crude Oil % 14% % 10% 8% 6% Oil Price ($/bbl) 4% 2% 20 0% 0 Source: S&P Capital IQ Platform, PD Model Market Signals, an offering of S&P Global Market Intelligence, as of September 20, the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. 48

49 Probability of Default (PD) Default Risk By Industry One-Year Median Probability Of Default Oil & Gas Drilling Oil & Gas Equipment & Services Integrated Oil & Gas Oil & Gas Exploration & Production Oil & Gas Refining & Marketing Oil & Gas Storage & Transportation Coal & Consumable Fuels Crude Oil 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Oil Price ($/bbl) Source: S&P Capital IQ Platform, PD Model Market Signals, an offering of S&P Global Market Intelligence, as of September 20, the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. 49

50 Probability Of Default (PD) Model Fundamentals Quantitative Fundamental-Based Probability Of Default Model Primary output is one-year probability of default (i.e. 0.5%) with tenors to five years available The model produces both a financial risk PD and a business risk PD combined in the final PD score Secondary output is mapped to a lowercase credit score (i.e. bbb ) Covers Corporates and Banks: no size limit Pre-scored and scoring on the fly available More than 727,000 public & private companies pre-scored globally Methodology Proprietary Parameters Input Factors Score Adjustments Corp: Financial, industry, macroeconomic factors Banks: financials, BICRA score, macroeconomic factors Calibrated to defaults Country Risk scores Corporate Industry Risk scores Financial Risk: Liquidity, profitability, leverage, etc. Business Risk: proxies to measure competitiveness, etc. Corp: Sovereign Transfer & Convertibility cap Sovereign cap (Banks) Parental and gov t support Lowercase nomenclature is used to differentiate S&P Global Market Intelligence PD credit model scores from the credit ratings issued by S&P Global Ratings. the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. 50

51 PD Model Fundamentals Output Probability of Default and Contribution Business vs. Financial Risk Impact of Credit Enhancement Input Factors, Contribution and Sensitivities Entity PD vs. Peer Benchmarks For illustrative purposes only. the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. 51

52 Global Industry Risk Fundamental-Based Probability Of Default For Global Energy Industry CQ CQ CQ CQ CQ CQ CQ CQ CQ Oil and Gas Exploration and Production 3.66% 4.91% 6.49% 9.67% 9.76% 10.34% 9.95% 9.48% 7.29% Oil and Gas Equipment and Services 1.92% 1.94% 2.21% 3.34% 3.83% 4.45% 4.70% 4.98% 5.38% Oil and Gas Drilling 1.78% 1.89% 2.08% 2.63% 2.86% 2.91% 2.91% 3.31% 4.70% Oil and Gas Refining and Marketing 4.71% 4.57% 4.51% 4.22% 4.24% 4.04% 4.04% 4.03% 4.09% Coal and Consumable Fuels 4.04% 4.33% 4.53% 4.34% 4.40% 4.40% 4.36% 4.29% 3.86% Oil and Gas Storage and Transportation 2.00% 1.90% 1.88% 1.72% 1.61% 1.60% 1.65% 1.64% 1.78% Integrated Oil and Gas 0.68% 0.78% 0.78% 0.72% 0.73% 0.64% 0.64% 0.64% 0.63% Source: S&P Capital IQ Platform, an offering of S&P Global Market Intelligence, as of September 20, For illustrative purposes only. the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. 52

53 Key Drivers Of Relative Credit Quality PD Model Fundamentals Net Income/ Total Revenues Total Revenue Return on Net Capital Total Equity Current Liabilities/ Net Worth Net Income/ Total Liabilities Debt/ Debt + Equity Reserves/ Total Assets EBIT Interest Coverage Return on Net Capital EBIT/ Revenues a -39.8% -39.6% -3.0% -56.8% -5.0% -5.1% 0.0% -25.3% -11.5% -10.8% -0.3% a % -50.6% -18.8% -33.8% -7.4% -8.6% 0.0% -21.7% -7.0% -10.9% -18.6% bbb % -10.1% -12.1% -40.3% -11.2% -8.1% 0.0% -22.4% -9.2% -8.9% -18.7% bbb -24.8% -0.7% -10.1% -43.0% -15.0% -5.3% 0.0% -25.2% -16.6% -13.8% -32.8% bbb % 12.5% -13.3% -25.6% -11.6% -6.3% 0.0% -14.2% -10.2% -9.0% -21.1% bb % -1.1% -11.1% -16.4% -7.0% -4.7% 0.0% -13.9% -7.4% -6.9% -13.5% bb -15.1% -0.2% -6.2% -5.1% -4.0% -2.5% 0.0% -8.0% -6.1% -7.2% -11.2% bb % 5.1% -3.9% 15.4% -2.4% -1.7% 0.0% -6.3% -5.1% -6.4% -10.5% b+ 9.4% 8.3% 1.2% 5.4% 1.9% -0.3% 0.2% -1.6% -2.2% -3.5% -6.3% b 25.4% 9.7% 7.3% 10.6% 8.4% 1.4% 0.6% 4.9% 0.1% -1.6% -3.4% b- 57.4% 14.1% 21.1% 18.7% 16.2% 3.6% 0.4% 2.3% 0.2% -1.7% 0.2% ccc+ 96.6% 24.6% 38.7% 19.8% 15.4% 13.6% 1.2% 12.6% 4.7% 3.3% 5.1% ccc 156.5% 29.9% 53.6% 47.7% 13.9% 33.3% 7.3% 26.2% 8.3% 9.2% 21.6% ccc % 55.5% 48.4% 49.9% 48.8% 33.0% 23.8% 22.4% 3.9% 8.7% 31.9% cc 92.5% 148.1% 30.9% 56.8% 39.4% 16.9% 46.4% 42.4% 24.0% 30.5% 24.4% Grand Total 27.7% 12.3% 9.5% 7.1% 5.1% 4.1% 1.5% 0.1% -1.9% -2.5% -4.1% Source: S&P Capital IQ Platform, an offering of S&P Global Market Intelligence, as of September 20, Lowercase nomenclature is used to differentiate S&P Global Market Intelligence PD credit model scores from the credit ratings issued by S&P Global Ratings. For illustrative purposes only. the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. 53

54 Energy Bankruptcies By Quarter 30 Oil and Gas Exploration and Production Oil and Gas Refining and Marketing Coal and Consumable Fuels Oil and Gas Equipment and Services Oil and Gas Drilling Oil and Gas Storage and Transportation Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr Source: S&P Capital IQ Platform, an offering of S&P Global Market Intelligence, as of September 16, For illustrative purposes only. the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. 54

55 Elevating Risk Of Defaulters Average Level Of Credit Risk Metrics PD Market Signals PD Fundamentals S&P Rating 100% 50% 22 aaa 19 aa 16 a 13 bbb 25% 10 bb 7b 13% 4ccc 1c % d -2 Days Before Bankruptcy Filing Source: S&P Capital IQ Platform, an offering of S&P Global Market Intelligence, as of September 20, Lowercase nomenclature is used to differentiate S&P Global Market Intelligence PD credit model scores from the credit ratings issued by S&P Global Ratings. For illustrative purposes only. the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. 55

56 Gulfmark Offshore, Inc. (OTCPK:GLFM.Q) Bankruptcy Date: May 17, 2017 Significant increases in PDs before downgrades and bankruptcy PD Market Signals PD Fundamentals Potential Red Flags/Distress Indicators Issuer Credit Rating 100% 90% 80% 70% 60% 50% Impairment Charge of $152.1mm Impairment Charge of $46.1mm Missed Debt Payment and subsequent Bankruptcy Filing 20 A 17 BBB 14 BB 11 B 40% 30% Impairment Charge of $7.5mm 8CCC 5C 20% 10% 2D NR 0% -1 Source: S&P Capital IQ Platform, an offering of S&P Global Market Intelligence, as of September 20, Credit ratings provided by S&P Global Ratings. For illustrative purposes only. the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. 56

57 Gulfmark Offshore, Inc. Fundamental Drivers Of Risk Source: S&P Capital IQ Platform, an offering of S&P Global Market Intelligence, as of September 20, For illustrative purposes only. the prior written approval of S&P Global Market Intelligence. Not for distribution to the public. 57

58 Thank You Thomas Watters Managing Director, Corporate Ratings S&P Global Ratings Jim Elder Director, Risk Services S&P Global Market Intelligence October 3, 2017

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