Diamond Offshore Drilling Inc. filed for bankruptcy protection Sunday, as the plunge in oil prices and the downturn in business activity because of the coronavirus pandemic have sapped demand for its offshore drilling services.
The Houston-based contract driller said it sought protection from creditors under chapter 11 after the downturn in the offshore-drilling industry "worsened precipitously" because of the oil-price war between the Organization of the Petroleum Exporting Countries and Russia along with the Covid-19 pandemic, in papers filed in U.S. Bankruptcy Court in Houston.
S&P Global Ratings recently downgraded the company's debt after Diamond skipped an interest payment to bondholders, which started the clock on a 30-day grace period to either pay up or default. On Friday, the ratings agency cut its rating on Diamond Offshore's debt to D, indicating it expected the company to not make the payment.
With offshore oil producers shutting off wells in the U.S. Gulf of Mexico following a collapse in crude prices due to the coronavirus pandemic, demand for Diamond's fleet of offshore-drilling rigs and drill ships has dried up. As conditions worsened in the offshore industry, the company drew down $400 million on its revolver loan.
Loews Corp. owns a majority stake in the contract driller, which employs 2,500 people and had revenue of $981 million last year. Diamond Offshore listed assets of $5.8 billion and debts of $2.6 billion in its chapter 11 petition.
The company's debt load includes some $2 billion to bondholders. That debt had been trading at deeply distressed levels, between 12 cents and 13 cents on the dollar. The company's shares closed Friday at 94 cents.
Diamond Offshore's bankruptcy advisers include Paul, Weiss, Rifkind, Wharton & Garrison LLP; Porter Hedges LLP; Alvarez & Marshall North America LLC; and Lazard Frères & Co. LLC.
Judge David R. Jones has been assigned the case, number 20-32307.