Seadrill, a Big Offshore Oil Player, to Seek Bankruptcy Protection--Update

By Costas Paris Features Dow Jones Newswires

Offshore-drilling services major Seadrill Ltd. said Thursday it will likely file for bankruptcy protection in under three weeks as part of a plan to restructure around $10 billion in debt.

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"Our primary objective is concluding final negotiations on our comprehensive restructuring plan, which is at an advanced stage and likely to be implemented via chapter 11 proceedings on or before September 12, 2017," chief executive Anton Dibowitz said.

The Bermuda-based company, controlled by Norwegian shipping magnate John Fredriksen, is one of the world's largest offshore drilling companies.

Demand for the company's rigs, which formerly commanded daily leases of up to $800,000, dropped to around $200,000 as cheap oil from U.S. shale drilling flooded the market. Seadrill's shares fell more than 17% in early European trading and are down 99% from their 2013 peak.

The company, which operates a fleet of 68 rigs and drillships, has said any restructuring plan will require a "substantial impairment or conversion" of its bonds, as well as "impairment, losses or substantial dilution" for other stakeholders.

It warned that shareholders will likely get "minimal recovery for their existing shares."

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Seadrill has managed to push back a number of restructuring deadlines over the past year, but it faces a $1 billion bond, which matures next month and analysts said it has no option, but to file for chapter 11.

In an interview with The Wall Street Journal in June Mr. Fredriksen said he was putting in long hours to keep Seadrill from collapsing.

"It's hard to answer if it will come out of restructuring, but as long as I back it, we'll be OK," Mr. Fredriksen said. "In the past, we've dealt with messier situations than Seadrill, but we came through."

The low oil prices, coupled with a glut of rigs, has put rig owners under severe pressure. Seadrill, employed 5,271 at the end 2016 -- a reduction of more than 1,700 from the previous year.

The company said early Thursday that its operating income in the second quarter swung to a $100 million loss from a $364 million profit a year earlier. Revenue fell 34% on year.

Patrick Fitzgerald contributed to this article

Write to Costas Paris at costas.paris@wsj.com

Offshore-drilling services major Seadrill Ltd. said Thursday it will likely file for bankruptcy protection next month as part of a plan to restructure around $10 billion in debt.

The Bermuda-based company, controlled by Norwegian shipping magnate John Fredriksen, is one of the world's largest offshore drilling companies. It operates a fleet of 68 rigs and drillships for customers including Total SA, Petrobras and Exxon Mobil Corp.

Seadrill said it plans to file for chapter 11 in the U.S. by Sept. 12 but that its business operations remain unaffected by the restructuring efforts and it expects to continue to meet its ongoing customer and business counterparty obligations.

Its assets at the end of the first half amounted to $20.7 billion.

Seadrill's shares tumbled 10 cents to 16 cents in New York trading and are down 99% from their 2013 peak, when the company's market value exceeded $22 billion.

Daily leases for the company's rigs, which commanded up to $800,000, dropped to around $200,000 as cheap oil from U.S. shale drilling flooded the market.

The low oil prices, coupled with a glut of rigs, has put rig owners under severe pressure. In late July, Ocean Rig UDW Inc. filed for bankruptcy protection in the U.S. Hercules Offshore Inc., GulfMark Offshore Inc., Toisa Ltd. and Vantage Drilling have also spent time in bankruptcy court since oil and gas prices cratered. Paragon Offshore Ltd., which emerged from chapter 11 last month, was forced back into bankruptcy after it was unable to transfer two rigs to its reorganized entity.

Seadrill has managed to push back a number of restructuring deadlines over the past year, but it faces a $1 billion bond, which matures next month.

The company said its latest restructuring plan will likely involve raising about $1 billion of new capital, along with a five-year extension of its bank facilities and "substantial" impairment or conversion of its bonds into equity.

Seadrill is discussing the restructuring with dozens of creditor banks including Sweden's Nordea, Norway's DNB and Denmark's Danske Bank, as well as with bondholders and rig-building yards in Asia.

In an interview with The Wall Street Journal in June, Mr. Fredriksen said he was putting in long hours to keep Seadrill from collapsing. "It's hard to answer if it will come out of restructuring, but as long as I back it, we'll be OK," Mr. Fredriksen said. "In the past, we've dealt with messier situations than Seadrill, but we came through."

Patrick Fitzgerald

contributed to this article

Write to Costas Paris at costas.paris@wsj.com

(END) Dow Jones Newswires

August 24, 2017 12:09 ET (16:09 GMT)