Pacific Drilling V Ltd. -- Moody's assigns a B3 CFR to new issuer Pacific Drilling V Limited

New York, November 12, 2012 -- Moody's assigned a B3 Corporate Family Rating (CFR) to Pacific Drilling V Limited (PDC5), a wholly-owned subsidiary of Pacific Drilling S.A. (PacDrilling). Moody's also rated PDC5's planned offering of $500 million of senior secured notes B3. PDC5 will use approximately $350 million of the net proceeds from the offering to fund the remaining construction payments for a deepwater drillship, the Pacific Khamsin, which is scheduled for delivery in April 2013. The remaining proceeds will be available for general corporate purposes of PacDrilling. The outlook is positive given our expectation that the Pacific Khamsin will be delivered and operating under a contract with a large, international oil company within the next twelve months.

RATING RATIONALE

The B3 CFR for PDC5 reflects its early stage of development with a single drillship under construction, the lack of current cash flow, the lack of an executed work contract for the drillship, and the relatively weak credit protection provided under its bond indenture. The CFR also considers the unsecured guarantee of PacDrilling as well as the expectation that PDC5 will enter into a multi-year work contract with a major international oil company at market rates before the end of 2012. The financial support provided by the PacDrilling guarantee is limited as the company's only cash flow generating assets are four drillships that are burdened by $1.7 billion of project finance debt that has a balloon maturity in 2015, two years prior to the maturity date of PDC5's senior secured notes. There is significant residual value after debt service associated with PacDrilling's drillships, but until the project finance debt is retired, new financing commitments or a sale of assets would be necessary to realize this value. PacDrilling is majority-owned by Quantum Pacific Group (Quantum), an investment firm with substantial financial resources. To date, Quantum has invested approximately $1.6 billion of equity into PacDrilling and could provide additional credit support although it is under no contractual obligation to do so.

Because the capital structure at PDC5 includes only one class of debt, the senior secured note rating is the same as the B3 CFR. Moody's assigned a Caa1 Probability of Default Rating to reflect the higher risk of default given the lack of cash flow generation by the borrower. The collateral for the notes is a modern sixth generation drillship that is approximately 85% constructed. In light of this security, a 65% recovery factor is assumed under Moody's Loss Given Default methodology.

Moody's assigned a SGL-4 Speculative Grade Liquidity Rating to PDC5 reflecting weak liquidity through the end of 2013 and its reliance on PacDrilling. Internal sources of liquidity are limited to the $350 million of cash proceeds set aside, but not escrowed, to make the final construction payments on the Pacific Khamsin. Moody's does not expect the drillship to generate cash flow before the fourth quarter of 2013 assuming an on-time delivery and a timely completion of sea trials and mobilization. External liquidity is also limited with a high reliance on liquidity support from the parent company. In the next twelve months, PacDrilling's should receive approximately $45 million of distributions from the project finance waterfall on its four operating drillships that will supplement its estimated $500 million of unrestricted cash pro forma for the note offering. However, PacDrilling has two additional drillships under construction which will require about $450 million of construction payments in 2013 and $330 million in 2014. Moody's expects PacDrilling to pursue additional financing to fund the shortfall and provide additional liquidity to the parent, however no funding commitments are currently in place. Secondary liquidity is limited as all physical assets are pledged as collateral.

The outlook is positive as we expect the credit quality of PDC5 to improve once a contract is signed, the drillship is delivered, and operations commence. All of these factors are expected within the next 12 months. The rating could be upgraded once the PDC5 begins to generate cash flow and there is better visibility to de-leveraging at PDC5 and at PacDrilling. Alternatively, the outlook could be stabilized or the rating could be downgraded if there is a delay in contracting, delivery, and operation of the Pacific Khamsin drillship beyond what is currently projected by the company. In addition, operational issues at the four operating drillships could impact the ability for PacDrilling to perform under its guarantee should it be necessary. Therefore, if there is an operational issue at any of the operating drillships, it would be credit negative for PDC5 as well.

Applying Moody's Global Oilfield Services rating methodology, PacDrilling maps to a B1 rating over the next 12 to 18 months, which is two notches higher than the assigned rating of B3 for PDC5. The two notch difference reflects the company's very short corporate and operating history, the lack of cash flow at the PDC5 issuer level, and the high leverage of over 7.0x on a run-rate basis pro forma for the new notes.

Pacific Drilling S.A., a Luxembourg based company, is a provider of ultra-deepwater drilling services to the oil and gas industry. Its modern fleet consists of four operating drillships, all constructed since October 2010, along with three drillships in various stages of construction. Pacific Drilling is majority owned and controlled by the Quantum Pacific Group, an investment holdings group with investments in fertilizers and specialty chemicals, energy, shipping and transportation.

The principal methodology used in rating Pacific Drilling V Limited was the Global Oilfield Services Rating 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.

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Stuart Miller VP - Senior Credit Officer Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Steven Wood MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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