Oil Drilling Company Seadrill Heading for Chapter 11 Bankruptcy

Oil platform in the USA
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Seadrill Limited to Seek Chapter 11 Bankruptcy Protection

Seadrill Ltd, once the biggest offshore drilling company in America, is now close to biting the dust. Seadrill announced in its latest quarterly call that the company will be filing for Chapter 11 bankruptcy as part of its ongoing restructuring efforts.

The bankruptcy is expected to be filed by September 12. The company will be seeking the court’s protection while negotiating with its creditors to extend its debt repayment schedule.

Seadrill released its second-quarter earnings and once again reported declining revenue followed by mounting losses. The company reported a second-quarter year-over-year revenue decline of more than 33%. Meanwhile, net losses piled up to $158.0 million.

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The company is facing tumultuous times as the oil industry sees its downfall. The global oil glut has contributed to oil prices falling to multi-year lows, which are undercutting profits of nearly all oil-related companies. Seadrill has likewise been struggling to keep its rigs running amid the oil industry’s growing crisis.

The company said in the earnings release that it is currently in the advanced phase of its restructuring plan, and is planning to raise about $1.0 billion in additional capital while negotiating with its banks to extend its credit facilities.

The company is highly leveraged as it deals with a huge debt burden. Much of its debt is coming due this year, which has forced it to seek protection against its creditors.

Just last week, Seadrill amended the terms of its credit facilities in order to protect some of its partners in the event of the company’s default. The protected partners who guaranteed Seadrill’s loans will remain safe in the event of its bankruptcy.

Meanwhile, shareholders who invested in the company’s stock during its boom years have seen their investments getting wiped out. Seadrill stock has cratered to all-time lows as its financial woes continue.

The company sent out a clear warning to current shareholders in its second-quarter earnings release, saying, “As a result, the Company currently expects that shareholders are likely to receive minimal recovery for their existing shares.”

Sources

SDRL – Seadrill Limited Announces Second Quarter 2017 Results,” Seadrill Ltd, August 24, 2017.

Seadrill Limited (SDRL) – Second quarter 2017 results,” Seadrill Ltd, August 24, 2017.

SDRL – Amendments to Certain Credit Facilities to Insulate Seadrill Partners from Seadrill Limited’s Restructuring,” Seadrill Ltd, August 17, 2017.

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