More than two dozen companies affiliated with the offshore rig operator Seadrill have filed for Chapter 11 bankruptcy in a U.S. court, marking the latest in a long-running list of financial restructurings in the offshore sector.
On Tuesday, Seadrill Partners LLC, Seadrill International Ltd., Seadrill Operating LP and 26 more Seadrill entities filed for relief under Chapter 11 in the Southern District of Texas and asked for joint administration of the case under the Seadrill Partners name. The parties’ largest listed creditor is also a Seadrill entity – London-headquartered Seadrill Limited, which claims $55 million in unpaid bills from Seadrill Partners (and also holds a 35 percent stake in the firm). The next largest creditors are competing rig operator Transocean ($6.7 million), insurance and risk management company Marsh AS ($3.8 million), law firm Baker & Hostetler ($900,000) and U.S. Gulf of Mexico crewing agency Prime Ocean ($325,000).
“The company has filed voluntary petitions under chapter 11 of the Bankruptcy Code to preserve value and to continue the operation and marketing its assets,” the firm said in a statement Tuesday. “[Seadrill Partners] intends to use the bankruptcy process to ensure that all customer, vendor and employee obligations are met without interruption and to complete a consensual restructuring of its debt.”
Seadrill Partners LLC lost $1.1 billion in the first half of the year, driven primarily by impairments on its fleet. It faced difficulty in paying interests on a term loan due on June 30, and it reached an agreement with some of its lenders for another loan in lieu of the interest payment. The aagreement required the company to complete a recapitalization plan that was acceptable to the lenders by December 15.
Seadrill Partners is listed on the OTC Markets exchange, where its stock has traded persistently below the $1 per share mark since the start of the year.
Seadrill Limited faces its own challenges: it has skipped interest payments and has not reached an agreement with its bank lenders on restructuring $5.7 billion in loan facilities. It has warned of a “high probability” that its shareholders might lose some or all of the value of their equity stake in the event of a full restructuring, which would likely involve a debt for equity swap. Like Seadrill Partners, its stock is trading in the range of $0.20 per share on the OTC exchange.
“We continue to address the industry issue of too many rigs and too much debt. Managing our rig count is the necessary balance to bringing down our debt burden and we are progressing plans to safely recycle some of our rigs, subject to the approval of our lenders,” said recently-appointed CEO Stuart Jackson in a statement last month.
The wave of financial difficulties affects the entire offshore drilling sector. Competitors Valaris, Noble, Pacific Drilling and Diamond Offshore have all filed for Chapter 11 this year. Seadrill and Pacific Drilling both went through bankruptcy proceedings in 2018.
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