Seadrill Ltd Warns of Chapter 11

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Seadrill Ltd (NYSE:SDRL) announced that it has delayed restructuring its $14.0 billion in debt and liabilities until September 12 from a previous deadline of July 31. The offshore drilling contractor also warned that it will most likely file for Chapter 11 bankruptcy protection.

The company stated that lenders, representing 84% of the exposure under the $450.0-million West Eminence facility, agreed to extend the maturity date of the facility from August 15, 2017 to September 14, 2017.

Seadrill plans to use a scheme of arrangement requiring a majority in number of the lenders, representing 75% of value, to extend the maturity of this facility.

The company also noted that it is in advanced discussions with certain third parties and other related investors, as well as its secured lenders, regarding the terms of a comprehensive recapitalization.

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The company reiterated that the comprehensive restructuring plan will likely involve chapter 11 proceedings. Seadrill believes that the extension provides the necessary time to finalize negotiations and do the necessary paperwork.

As previously disclosed, we continue to believe that implementation of a comprehensive restructuring plan will likely involve chapter 11 proceedings, and we are preparing accordingly,” the company said.

Seadrill is currently negotiating with more than 40 banks, including Norway’s DNB, Sweden’s Nordea, and Denmark’s Danske Bank, as well as with bondholders and several rig-building yards.

Back in April, Seadrill announced that it has reached and agreement with its banking group to extend several important dates as part of the company’s continued restructuring efforts.  The company warned back then that because of the restructuring plan, “shareholders are likely to receive minimal recovery for their existing shares,” and that is bonds would be hit as it prepared for potential bankruptcy proceedings.

Seadrill, once the biggest offshore rig firm by market cap, has seen its share price tumble 99% from a September 2013 peak of more than $46.00 per share. Shares in Seadrill are currently trading hands at just $0.40. The company has five regional offices around the world–Oslo, Dubai, Houston, Rio De Janeiro, and Ciudad del Carmen–and has close to 5,200 employees.

Seadrill was one of the top high-dividend stocks in the oil and gas industry, with a frothy yield in excess of 10%. Since those heady days, oil prices have fallen more than 50% and oil and gas firms have slashed investments, all of which has gutted Seadrill’s bottom line.

Despite the serious uncertainty, Seadrill has rigs under construction at Samsung Electronic Co Ltd and Daewoo Shipbuilding & Marine Engineering shipyards in South Korea, for Jurong Port Pte Ltd in Singapore, and with Dalian Shipping Industry Company and COSCO Group Shipyard in China.

Most recently, on July 13, Seadrill announced it had secured a firm contract for a well and a drill stem test with Brazil’s Statoil Brasil Óleo e Gas. The work is for the West Saturn and operations are expected to commence between December 2017 and January 2018.

Sources:

Amendments to Secured Credit Facilities,” Seadrill Ltd, July 26, 2017.

Amendments to Secured Credit Facilities,” Seadrill Ltd, April 4, 2017.

Seadrill Limited Announces Contract Award for the West Saturn,” Seadrill Ltd, July 13, 2017.

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