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Rating Action:

Moody's downgrades Global Geophysical's CFR to B3; outlook remains negative

11 Mar 2013

Approximately $250 million rated notes affected

New York, March 11, 2013 -- Moody's Investors Service downgraded Global Geophysical Services, Inc.'s (GGS) Corporate Family Rating (CFR) to B3 from B2, Probability of Default Rating (PDR) to B3-PD from B2-PD, senior unsecured notes to Caa1 from B3 and Speculative Grade Liquidity (SGL) rating to SGL-4 from SGL-3. The rating outlook remains negative.

"The downgrade reflects GGS's high leverage profile and high cash flow volatility due to its dependence on the cyclical capital expenditure budgets of exploration and production (E&P) companies," stated Michael Somogyi, Vice President and Senior Analyst. "In addition, GGS's asset and revenue base is small relative to most other rated oilfield services companies, which makes it more vulnerable to fluctuating industry and capital market conditions." The SGL-4 Speculative Grade Liquidity rating reflects GGS's weak liquidity profile with approximately $25 million cash on hand, only $5.5 million available under its revolving credit facility and the early 2014 maturity date for the revolving credit facility.

Issuer: Global Geophysical Services, Inc.

..Downgrades:

Corporate Family Rating, downgraded to B3 from B2

Probability of Default rating, downgraded to B3-PD from B2-PD

Speculative Grade Liquidity Rating, downgraded to SGL-4 from SGL-3

US$200 million Senior Unsecured Regular Bond/Debenture, downgraded to Caa1 from B3

US$50 million Senior Unsecured Regular Bond/Debenture, downgraded to Caa1 from B3

RATINGS RATIONALE

With total adjusted assets of approximately $660 million and revenues of $340 million as of December 31, 2012, GGS is small relative to most other rated oilfield services companies and makes the company more vulnerable to fluctuating industry and capital market conditions. Following a ramp up in data acquisition for its multi-client library, GGS reported peak revenues of approximately $385 million in 2011. The continued, large capital spend for multi-client library through 2012, however, has extended the company's negative free cash flow operating profile for three consecutive years ending December 31, 2012 and has led to its elevated leverage profile and weakened liquidity position.

Despite an additional $165 million capital spend to expand its multi-client library in 2012, GGS reported a 12% year-over-year decline in revenues to approximately $340 million. GGS's adjusted EBITDA fell 30% year-over-year to $34 million and the company outspent internally generated cash flows by $75 million. We subtract multi-client seismic library capital expenditures from reported EBITDA in calculating our metrics to reflect the multi-client business segment's high capital intensity and the low near term certainty of generating cash flow net of capital expenditures. This is a standard calculation for the seismic companies that Moody's rates.

GGS ended 2012 with an adjusted debt balance of over $460 million and has averaged over $400 million over the last three years. The company's adjusted leverage profile at year-end was over 13x, with the five year average rising to over 6.5x at year end December 2012 compared to approximately 5.5x a year-ago. This leverage metric is commensurate with the Caa rating band. Over the longer term, we view the through the industry cycle debt / EBITDA of 4.0x -- 5.0x as appropriate for maintaining the B3 CFR given GGS's high business risk profile.

GGS announced the appointment of Richard White as its new President and CEO effective October 26, 2012. Along with additional executive appointments announced in December 2012, GGS enters 2013 transitioning to a more balanced earnings mix and prioritizing debt reduction through positive free cash flow generation. GGS is guiding to reduced capital spending on its multi-client data library program and a reduction in the company's fixed cost structure. Reflective of the company's reduced capex guidance as it shifts focus to proprietary service offerings in North America, we expect GGS to grow EBITDA and generate positive free cash flow to support targeted debt reduction of $30 - $40 million in 2013.

The SGL-4 Speculative Grade Liquidity rating reflects GGS's weakened liquidity profile with approximately $25 million cash on hand and only $5.5 million available under its revolving credit facility. The company's $85 million senior secured RCL matures April 2014 with a step down of $17.5 million scheduled in April 2013. It is Moody's understanding that the company is in discussions with its bank lending group to re-syndicate and extend the facility. Covenants under the senior secured credit facility include EBITDA / interest of not less than 2.5x and senior secured debt / EBITDA of no more than 2.0x. As of December 31, 2012, GGS had good headroom under these covenants. Substantially all of the company's assets are pledged as security under the credit facility which limits the extent to which asset sales could provide a source of additional liquidity if needed.

The Caa1 senior unsecured note rating reflects GGS' overall probability of default, to which Moody's has assigned a PDR of B3-PD, and a loss given default of LGD4-64%. The size of the senior secured revolver's potential priority claim relative to the senior unsecured notes results in the notes being rated one notch beneath the B3 CFR under Moody's Loss Given Default Methodology.

The rating outlook is negative. In order to stabilize the outlook, GGS must improve its liquidity profile and execute on initiatives to generate positive free cash flows and reduce leverage. Given GGS's small size within the broader oilfield services industry and the highly cyclical nature of the demand for seismic services, an upgrade is unlikely without a significant reduction in its leverage position. An upgrade is possible, if GGS successfully executes on its debt reduction strategy through free cash flow generation leading to adjusted Debt / EBITDA (net of multi-client spending) to be sustained below 3x. We could downgrade the ratings if liquidity were to deteriorate or if adjusted Debt / EBITDA (net of multi-client spending) is sustained at or above 5x.

The principal methodology used in this rating was the Global Oilfield Services Industry Methodology published in December 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Global Geophysical Services, Inc. is a seismic data company that offers an integrated suite of seismic data solutions to the global oil and gas industry. Global Geophysical Services is headquartered in Houston, Texas.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Michael Paul Somogyi
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Steven Wood
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades Global Geophysical's CFR to B3; outlook remains negative
No Related Data.
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