NANA Development Corporation Statement on Moody’s Downgrade

Last week Moody's issued a press release about their decision to downgrade NANA Development Corporation's (NDC's) debt rating. While we disagree with some of the conclusions Moody’s analysts made, FY2016 has presented a challenging year for our companies involved in the oil industry.

As Tim Bradner writes in his newsletter, the Alaska Economic Report, "It’s a problem affecting most Alaska firms doing oil support work and they are affected in ways similar to NDC.  That NANA’s oil businesses for now are in a ‘deteriorating’ environment is no big surprise–even ExxonMobil has seen a downgrade by rating agencies.”

NDC Board Chairman Ely Cyrus said, “I communicated to our shareholders this past fiscal year of the double edged sword low oil prices present to us. The majority of our shareholders live in the Northwest Arctic, which faces some of the highest costs of living nationally, and energy costs alone account for many families’ highest expense. When the price of oil is low, the prices of heating fuel and gasoline decrease. The majority of the gasoline and heating fuel sold in the region is purchased in the spring before being transported north. The lower purchase price allows for a lower sale price to residents in the region. The downside of this is that businesses involved in this line of work suffer margin erosion and a decrease in available work.”

About 40% of NDC revenues are tied to oil, with 50% of revenues in the federal sector. NDC President Helvi Sandvik said, “We disagree with Moody’s analysis of our federal sector performance. Our Federal Sector continues to forecast slight growth in business over last year.”

Board Chairman Cyrus said, “The board of directors of NDC has remained committed to ensuring the strategic focus of the company delivers to performance expectations. As our work in the federal government shows, we believe we have the right balance of skills and diversity to meet the challenges that we face. We continually monitor the performance of each of our companies, and the board is kept up to date as staff monitor global economic and financial developments. The board has tasked our company leadership to find the best path forward in this challenging environment, and we expect to see our margins to continue to improve as the oil markets begin to recover.”

The company has significantly reduced costs throughout the enterprise in response to lower than expected revenues in the Oil & Gas Sector. “We are closely watching oil, and reducing our costs where we can without compromising our ability to deliver, which will position us well for growth when oil prices rise,” said Sandvik.

“We fully expect to deliver on the strategic goals we set on behalf of our shareholders,” said Cyrus.