Drilling contractor Seadrill reported today (24 August) that it would likely file for Chapter 11 bankruptcy on or before 12 September to implement its comprehensive restructuring plan.
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| Source: Seadrill |
The company said it is in advanced discussions for restructuring with third party and related investors, an ad hoc group of its bondholders and secured lenders. Those restructuring plans will likely include raising US$1 billion of new capital, an approximate five-year extension of its bank facilities, and a deferral of amortizations. It also will likely require a substantial impairment or conversion of its bonds, and impairment and losses for other stakeholders, including shipyards, Seadrill said in a press release announcing its Q2 2017 earnings.
In July, Seadrill reached an agreement with its bank group to extend the date by which a comprehensive restructuring plan must be agreed to 12 September, and extended the maturities of its $400 million credit facility and US$450 million credit facility provided by Seadrill Eminence Ltd. to 14 September this year. Seadrill also has taken steps to insulate Archer, Seadrill Partners and Seamex from a default caused by a Chapter 11 filing.
In January this year, Seadrill announced it was seeking to raise US$1 billion to restructure the company, which has been battered by the low oil price environment in which oil and gas producers have curtailed drilling capital expenditures.
As part of its restructuring, Sevan Drilling and Cosco Shipyard will defer the Sevan Developer delivery period until 30 June 2020. Cosco last month refunded $25.3 million plus interest to Sevan Drilling, which still has the right to market the rig for work. Seadrill also is in talks with Samsung Heavy Industries, which is building the West Draco and West Dorado rigs, over delivery of those newbuilds.
Signs of a potential recovery are slowly becoming more evident, with an increase in tendering activity, fixtures, and scrapping over the last quarter. However, oil companies continue to focus on cash conservation and, in the majority of cases, their offshore capital expenditures for full-year 2017 is now forecast to be less than initial guidance, said Seadrill.
“This, alongside the supply overhang, both in the floater and jackup markets, means that every tender is fiercely competitive,” Seadrill commented. “Oil companies continue to benefit from this by securing high-specification units at rates that are cash break even or lower.”
Although the market continues to be challenging, continued operational execution and strong customer relationships has enabled Seadrill to re-contract a number of units during the quarter, said Anton Dibowitz, who was named president and CEO of the company in May of this year.
“With a young versatile fleet and upon completion of our restructuring, we will be well placed to capitalize when the market recovers,” Dibowitz said.
Seadrill’s revenues for the quarter were up slightly to $577 million from Q1, but were offset by a net operating loss of $100 million after Seadrill recognized a $166 million loss for the drilling rigs West Triton, West Resolute, and West Mischief. Earnings before interest, taxes, depreciation and amortization were $27 million lower due to higher operating costs related to upfront costs for stacking units, certain supplier rebates, and higher general and administrative expenses related to restructuring costs. Expenses also grew to $65 million because of lower results from Seadrill's associated companies and foreign exchange losses.
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