Offshore driller Seadrill has said it has made progress with its restructuring plans which may involve Chapter 11 solution.
In April, the company reached an agreement with its bank group to extend the comprehensive restructuring plan negotiating period until July 31, 2017, reflecting significant progress on the terms of such restructuring made with the bank group, Seadrill said in its first quarter 2017 report on Wednesday.
The company also said it is now in advanced discussions with certain third party and related party investors and its secured lenders on the terms of a comprehensive recapitalization. Further, the company is in receipt of a proposal from the third party and related party investors which remains subject to further negotiation, final due diligence and documentation.
Seadrill is also in discussions with certain bondholders who have recently become restricted again. While discussions with secured lenders and certain investors have advanced significantly, a number of important terms continue to be negotiated and no assurance can be given that an agreement will be reached.
The company continues to believe that implementation of a comprehensive restructuring plan will likely involve schemes of arrangement or chapter 11 proceedings, and it is preparing accordingly.
It is likely that the comprehensive restructuring plan will require a substantial impairment or conversion of bonds, as well as impairment and losses for other stakeholders, including shipyards.
As a result, the company currently expects that shareholders are likely to receive minimal recovery for their existing shares. The company’s business operations remain unaffected by these restructuring efforts and the company expects to continue to meet its ongoing customer and business counterparty obligations.
Profit & revenues down
In the quarterly report on Wednesday, Seadrill said that, during the first quarter 2017, its revenues decreased by 36% to $569 million from $891 million in the same period of 2016.
The company’s operating income dropped by 75% totaling $83 million, compared to $328 million in the prior-year quarter.
Net income for the first quarter 2017 was $57 million, resulting in basic and diluted earnings per share of $0.13, compared to net profit of $149 million in the same period of 2016.
According to the quarterly report, Seadrill’s headcount has been reduced from 6,995 at year end 2015 to 5,196 at the end of the first quarter. Of the 1,799 reduction, 1,380 have been offshore and 419 onshore.
Seadrill’s order backlog as at May 24, 2017 is $3.4 billion, comprised of $1.4 billion for the floater fleet and $2 billion for the jack-up fleet. The average contract duration is 13 months for floaters and 30 months for jack-ups.
Looking ahead, Seadrill said that the offshore drilling market remains challenging and it expects this dynamic to continue in the short to medium term. The majority of customers remain focused on conserving cash and are still reluctant to commit to significant new capital projects offshore until an increased consistency and upward trend in oil prices is demonstrated. The significant rig supply overhang remains and a faster return to a balanced market will require drilling contractors to be more disciplined in retiring older units, the driller said.
According to Seadrill, tendering activity has continued at increased levels, albeit from a low base, over the past few months, especially in the North Sea floater and South-East Asia and Middle-East jack-up segments. Market behavior points increasingly to the market having reached its bottom. An increasing number of recent tenders released by oil companies seek to contract at current bottom of cycle dayrates for increased durations and / or with multiple fixed price options periods.
“We still believe in the long term fundamentals of the offshore drilling industry, driven by years of under-investment in new fields and the competitiveness of offshore resources on a full cycle basis,” Seadrill concluded.
Also on Wednesday, Seadrill promoted its chief commercial officer Anton Dibowitz to the CEO role, to replace Per Wullf starting from July.
Offshore Energy Today Staff