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Chapter 11 proceedings a stark possibility for beleaguered Seadrill

Chapter 11 proceedings a stark possibility for beleaguered Seadrill
Seadrill has announced better than expected financial results for Q4 of 2016, but the company could still face chapter 11 proceedings as it runs out of time to renegotiate its sizeable debts. 

The company posted earnings before interest, taxes, debt and amortisation in the fourth quarter of $354m, slightly beating expectations for $345m, and down from $513m in the year-ago period.

But the offshore drilling contractor is still beleaguered some $14bn of debt, largely caused by project cancellations driven by the oil price crash and a rapid decline in day rates.

Since 2014, the Oslo-listed organisation’s share price has tumbled by 92%.

It is attempting to renegotiate its debts, but has not ruled out the possibility of beginning chapter 11 proceedings, and has admitted it faces a stiff challenge to agree terms with all of its lenders before the deadline of 30 April.

“It will be challenging for the Company to finalise a fully consensual agreement before 30 April 2017, which is the maturity date of the…….facility and also a milestone under the bank facility amendments entered into in April 2016,” Seadrill said in its earnings summary.

“In the event a consensual restructuring agreement is not concluded or an agreement to an extension is not reached, we are also preparing various contingency plans, including potential schemes of arrangement or chapter 11 proceedings.”

Earnings are expected to fall during the current quarter, as a number of units come off contract and lower day rates take their toll. Earnings are expected to be $250m, based on operating income of $50m.