Seventy Seven Energy Inc (NYSE:SSE) Completes Hodges Trucking Spin off Consequently Downgraded


Dallas, Texas 06/29/2015 (Financialstrend) – Seventy Seven Energy Inc (NYSE:SSE) has completed the sale of its rig hauling company Hodges Trucking to Aveda Transportation and Energy Services. The sale according to CEO, Jerry Winchester allows the company to focus fully on its core business segment.  The sell believed to be worth $42 million is made of $15 million in cash and $27 million of principal amount junior secured fixed rate note.

Moody’s Downgrade

The sale did not include the real estate from which Hodges used to operate from, but 900 pieces of rig moving. The company also offloaded heavy haul equipment made of 200 haul trucks, 400 trailers and 70 bed/pole trucks. As Seventy Seven Energy Inc (NYSE:SSE) was offloading Hodges Truck, analysts at Moody’s Investors Service initiated coverage of the stock, consequently downgrading it to B2 from Ba3

The research firm raised concerns over the company’s weak credit metrics as well as the sustained elevated debt levels. Low oil prices have continued to be a big headwind for the company’s operations as drilling rigs, and hydraulic fracturing services continue to be costly.

Moody Research expects Seventy Seven Energy Inc (NYSE:SSE)’s cash balance to be challenged heading into 2016 as drilling contracts start to roll off as a result of an oversupplied market. Despite the negative sentiments shared by Moody’s, six analysts remain bullish on the company’s prospects reiterating a $10 share price target.

Jefferies Buy Rating

Jefferies, on the other hand, upgraded the stock to a ‘buy’ rating after an insightful meeting with the company’s CFO, Cary Baetz, and a number of investors. Jefferies maintains that the company is nearing a low point activity even on a softer CHK demand outlook.  The firm also believes that the company has brighter cash flow generation prospects that justify the buy rating. Headquartered in Oklahoma City SSE specializes on oil wells exploration, drilling, and Hydraulic fracturing.