Pacific Drilling Bankruptcy: Houston-Based Oil & Gas Drilling Co. Files for Chapter 11

Houston-Based Pacific Drilling Bankruptcy Owed to Oil Industry Slump
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Pacific Drilling Bankruptcy Owed to Industry Slump

Houston-based offshore oil and gas drilling company, Pacific Drilling SA (OTCMKTS:PACDF), has filed for Chapter 11 bankruptcy as it looks to restructure its debt. The Pacific Drilling bankruptcy is owed to the oil and gas industry’s ongoing slump.

Pacific Drilling has sought bankruptcy protection at the U.S. Bankruptcy Court in New York after having failed to reach an agreement with its lenders out of court.

The international drilling company from Luxembourg has a $3.0-billion debt loan, which it plans to restructure through bankruptcy.

Shipping industry business magnate Idan Ofer owns a majority stake in the drilling company and the bankruptcy filing indicates that Ofer may be ready to inject another $100.0-million in the company to support it through its bankruptcy phase.

Idan Ofer’s Quantum Pacific Ltd. has invested over $1.6-billion in Pacific Drilling since its inception in 2006. About 70% of the company is currently owned by Ofer’s Quantum Pacific.

However, Ofer’s pledge may do little to save the company from its inevitable financial troubles, which are largely owed to the ongoing slump in the energy sector.

Pacific Drilling Bankruptcy Follows Other Major Bankruptcies

Pacific Drilling identifies its business as “highly cyclical.” The offshore drilling company, which primarily makes money from the exploration and development of oil products, has been facing losses owing to the industry’s ongoing recession.

Oil and gas prices have dropped to multi-year lows in the midst of a global supply glut and weak industry demand. Prior to the Pacific Drilling bankruptcy, we have seen some other major offshore drillers heading down the same path—all attributing their financial woes to stagnating oil prices.

Just two months ago, one of the world’s largest offshore oil drilling companies, Seadrill Ltd., filed for bankruptcy as it dealt with mounting debt and piling losses.

Pacific Drilling has likewise been losing money while racking up a huge debt pile. The company tried to negotiate with its creditors to extend the deadline for its debt maturing in December. But having failed to do so, the company finally ended up filing for bankruptcy.

While the company says it has enough cash to make payments to employees and suppliers in the short term, its piling losses paint a different picture.

Company CEO Paul Reese says, “Throughout the Chapter 11 process, we anticipate using our strong cash position to meet all ongoing obligations to our employees, customers, vendors.”

Pacific Drilling has about $350.0-million in liquid cash on hand. Meanwhile, the company lost about $400.0-million in the first nine months of the current fiscal year.

 

Sources

Pacific Drilling Files for Chapter 11 Bankruptcy Protection,” The Wall Street Journal, November 13, 2017.

Pacific Drilling Files for Bankruptcy,” The Maritime Executive, November 13, 2017.

Idan Ofer offered $100m for Pacific Drilling restructuring,” Trade Winds, November 13, 2017.

Categories: Bankruptcies, NewsArticle

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