TEXT-Moody's release on Grey Wolf Inc

(The following statement was released by the rating agency)

Approximately US$600 Million of Debt Securities and Credit Facilities
Affected

April 21 - Moody's Investors Service placed the ratings for Grey Wolf, Inc.
(GW.A: Quote, Profile, Research) (GW) and Basic Energy Services, Inc. (BAS.N: Quote, Profile, Research) (Basic) under review for
possible upgrade following the companies' announcement that they have agreed to
a merger of equals. Grey Wolf's ratings under review are its Ba3 corporate
family rating (CFR), Ba3 probability of default rating, and B1 (LGD 4, 61%)
rating on the senior unsecured convertible notes. The ratings for Basic under
review are its Ba3 corporate family rating (CFR), Ba3 probability of default
rating, the B1 (LGD 5, 74%) senior unsecured note rating, and the Ba1 (LGD 2,
19%) rating on Basic's senior secured revolving credit facility.
The review for possible upgrade considers the combination of two well
established companies in the oilfield services industry that will have
increased geographic and product diversification and will have the ability to
provide a full range of services covering the entire lifecycle of an oil and
gas well. In addition, the review also reflects the conservative financial
profile of the individual companies as well as the pro forma financial profile
which seems to compare favorably to similarly rated oilfield services
companies, despite the addition of $600 million being raised to fund the cash
consideration being made to both Grey Wolf's and Basic's shareholders.
However, Moody's notes that despite the enhanced competitive position with an
ability to bundle its products and services, the new company will not be
gaining any additional scale in the legacy businesses and will have more
exposure to the drilling cycle and still be reliant on North America. Moody's
believes the pro forma company will have a volatile business mix given the
majority of the pro forma revenues and earnings will be directly tied to
drilling activity. In addition, Moody's expects the new company will remain
somewhat acquisitive, particularly in the well services sector, and continue
the consolidation strategy employed by Basic to this point.
Under the terms of the agreement, GW shareholders will receive $1.82 in cash
and 0.2500 shares of the new company (new GW) for each share of GW they
currently own. Based on this exchange ratio, each stockholder of GW will
receive one share of the new Grey Wolf for each four shares of GW in addition
to the cash consideration. Basic Energy Shareholders will receive $6.70 in cash
and 0.9195 shares of the new Grey Wolf for each share of Basic they currently
own. Upon closing, the pro forma ownership of the combined company will be 54%
owned by current GW shareholders and 46% owned by current Basic shareholders.
In concluding the review, Moody's will meet with senior management to better
understand the strategy and financial policies of new GW and whether they will
continue to be as conservative as the individual companies prior to the merger.
The review will focus on how acquisitive the new company will be, and how
future acquisitions will be funded. Moody's will also discuss management's view
on expansion opportunities in the international markets and how those
opportunities may be pursued given the relatively light international exposure
each company has thus far.
Grey Wolf, Inc. is headquartered in Houston, Texas. Basic Energy Services is
headquartered in Midland, Texas.
(New York Ratings Team)