What happened?
The stock of offshore drilling company Atwood Oceanics (NYSE:ATW) is drilling lower, in a way. The shares have been bumped down one category in Standard & Poor's' influential indices. S&P announced that Atwood Oceanics stock will be moved from its present position on the S&P MidCap 400 index to the S&P SmallCap 600. This decision was taken because, as S&P said in a press release, the company "is ranked at the bottom of the S&P MidCap 400 and has a market capitalization more representative of the small-cap market space." Atwood Oceanics trades places with Microsemi (NASDAQ:MSCC), which due to a merger will no longer be considered a small cap issue, and is to be included on the S&P MidCap 400. The Atwood Oceanics/Microsemi switch will take effect after the close of trading on Friday.

Does it matter?
In and of itself, of course, the downshifting of the stock to a "lower" index makes no difference to Atwood Oceanics' fundamentals -- it's merely a move to a different lineup of companies (the same, of course, can be said of Microsemi). But for Atwood Oceanics this underscores the company's awful stock performance, in which the shares have lost almost 80% of their value since last May and driven the company into what S&P considers Small Cap Land. The stock price slide is guilt by association. With the seeming free fall in crude oil prices, investors are abandoning production assets, particularly in the offshore drilling segment. There are a lot of players in the space at the moment, which certainly doesn't help improve sentiment. Atwood Oceanics is actually doing fairly well on a fundamental level given the circumstances -- subsequent to the S&P's announcement, the company provided Q1 guidance that came in above analyst expectations -- but it's in a business that investors are shunning at the moment.