Ausdrill Ltd.

The stable outlook reflects our expectation that Ausdrill will continue to generate positive free operating cash flows. We also expect the group to grow its order book across its key geographies under the Ausdrill, Barminco, and African Underground Mining Services (AUMS) brands. During benign industry conditions, the group could generate an adjusted debt-to-EBITDA ratio below 2.0x and funds from operations (FFO) to debt above 45%. During an industry downturn, the rating could tolerate Ausdrill's debt-to-EBITDA ratio weakening toward 3.0x and an FFO-to-debt ratio of around 30%. We consider a downgrade over the next 12 months to be unlikely given Ausdrill's recapitalized balance sheet. However, downward rating pressure could arise if Ausdrill's key credit metrics were to weaken, such that its

...The rating reflects Ausdrill Ltd.'s smaller scale globally, (notwithstanding its leadership position in a niche market), material exposure to Africa, and indirect exposure to volatile commodity prices. Offsetting the weaknesses are Ausdrill's long track record and expertise of operating in Africa, its conservative financial management, and a modestly diversified service offering that provides some resilience to an industry downturn. We expect Ausdrill to generate positive free operating cash flow over the next three years. This is the result of an improved operating environment, stabilized commodity prices, and a sizable, growing contract book based on recent contract wins and renewals. In our view, Ausdrill has a track record of conservative financial management. Ausdrill raised A$100 million of equity (before costs) to fund its growth capital expenditure for new contracts in late 2017, and raised an additional A$250 million of equity in 2018 to repay the company's senior notes due 2019....

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