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Ocean Rig considers bankruptcy amid distressed offshore market

Ocean Rig considers bankruptcy amid distressed offshore market
The depressing state of the offshore oil and gas market has prompted Ocean Rig to consider a reorganisation under bankruptcy, the company revealed in its latest financial results report.

George Economou, chairman and ceo of Ocean Rig, said the company’s debt obligations will need to be amended or exchanged for new debt and/or equity securities, and some debt holders may have little or no recovery on their investment.

“We continue to explore and consider alternatives, which may include a possible reorganisation under US bankruptcy laws or another jurisdiction, so that we can ride out this very difficult cycle with feasible prospects for strong, long term success,” Economou said.

“Given the ongoing distressed market environment as well as the consensus view that a recovery may not occur for several years, we have enaged financial and legal advisors to assess the viability of our capital structure and alternatives that may be available to pursue.

“In the recent period, we have been approached by several of our debt holders who have in certain cases also retained legal counsel and financial advisors,” he said.

Market conditions remain extremely negative with oil companies continuing to reduce their offshore budgest and as more floaters come off contract in the next six months, an already grossly oversupplied market is expected to worsen, Economou noted.

“In this current and anticipated poor market environment which we expect to persist for an extended period of time, we believe it is prudent to focus on maintaining liquidity and de-levering the company,” he said.

In the first half of 2016, Ocean Rig posted a profit of $444.09m, up from the gain of $116.01m in the same period of 2015.

Revenue in the first six months came up to $960.56m from $835.3m in the year-ago period.

Ocean Rig also announced that on 11 August, it reached an agreement with South Korea’s Samsung Heavy Industries related to the construction of three drillships to reschedule certain installments, postpone delivery of two of these drillships and amendment of certain other terms including the contract price.