TEXT-Moody's cuts Precision Drilling Corp

The negative outlook reflects that Precision will remain exposed to potentially higher interest rates, fees and discount on all of the secured debt as the syndication of the revolver and Term Loan A continues. Precision's Ba2 CFR reflects its pro-forma size and scale, reasonable pro-forma leverage and history of conservative fiscal management, good operating margins, and the geographic diversity of its pro-forma drilling rig fleet throughout North America.

The rating is tempered by the inherent volatility of contract drilling, concentration in North American land drilling, integration risks related to the acquisition of Grey Wolf, unit holder distributions as a Canadian income trust, and internal growth and acquisition strategies.

The rating considers Precision's and Grey Wolf's leading market positions in North America, longstanding customer relationships and quality rig fleet. Precision's completion business also adds an element of greater stability to the business mix.

The ratings of Grey Wolf will remain under review for possible upgrade pending the closing of its acquisition by Precision.

The rating on Grey Wolf's 3.75% senior unsecured convertible debt will remain at B1 for the portion of the convertible debt that remains outstanding after the acquisition closes. Grey Wolf's Ba3 CFR will be withdrawn when the Precision acquisition closes.

Precision is expected to acquire Grey Wolf on a fully diluted basis for aggregate consideration of approximately US$1.12 billion in cash and approximately 42 million Precision trust units, funded in part by the proposed issuance by Precision of a US$400 million senior secured term loan A, $400 million senior secured term loan B and by drawings under a US$400 million bridge facility.

The final composition of debt will not be determined until after the closing of the acquisition when the amount of Grey Wolf convertible debt holders exercising their change of control puts are known.

Downgrades:

..Issuer: Precision Drilling Corporation ....Probability of Default Rating, Downgraded to Ba2 from (P)Ba1 Upgrades: