Seadrill emerges from Chapter 11 protection

September 2018 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

September 2018 Issue

Following months of negotiations and delays, offshore drilling group Seadrill Limited has emerged from bankruptcy after successfully completing a Chapter 11 plan of reorganisation.

Hit by the continued downturn in the oil and gas industry, which reduced demand for drilling and negatively impacted its revenues, earnings and cash flows, Seadrill was forced to file for bankruptcy protection in September 2017.

Seadrill is one of a number of offshore drilling companies – others include Vantage Drilling Company, Ocean Rig UDW LLC., Paragon Offshore and Hercules Offshore, Inc. – to have filed for bankruptcy protection amid falling oil prices.

A leading offshore drilling contractor with 5000 employees, representing around 65 nationalities and operating in 15 countries on five continents, Seadrill owns 35 drilling rigs and manages 18 rigs on behalf of Seadrill Partners, Seamex and Northern Drilling. Seadrill’s versatile fleet of rigs comprises drillships, jack-up, semi-submersibles and tender rigs for operations in shallow to ultra-deepwater areas, in some of the most challenging sectors of offshore drilling.

After announcing a global settlement as part of its reorganisation plan in February 2018, the US Bankruptcy Court gave its approval in April. The plan has equitised approximately $2.4bn in unsecured bond obligations, more than $1bn in contingent newbuild obligations, substantial unliquidated guaranty obligations and approximately $250m in unsecured interest rate and currency swap claims.

In addition, the plan extends near term debt maturities, providing Seadrill with over $1bn in fresh capital and leaving employee, customer and ordinary trade claims largely unimpaired. Furthermore, all conditions precedent to the restructuring contemplated by the reorganisation plan have been satisfied or otherwise waived.

Seadrill has also been granted approval to list its new common shares on the New York Stock Exchange (NYSE) under the same NYSE ticker symbol SDRL as its existing common shares. Subject to relevant approvals, Seadrill also intends to have its equity listed on the Oslo Stock Exchange.

“I would like to thank our customers, vendors and financial stakeholders for their continued loyalty and support throughout the restructuring process,” said Anton Dibowitz, chief executive of Seadrill Management. “I would also like to thank all our employees for their continued hard work and dedication during this period and whose efforts were a key part of concluding this restructuring process.”

Seadrill was principally advised by Kirkland & Ellis LLP, Slaughter and May, Advokatfirmaet Thommessen AS, Jackson Walker LLP, Houlihan Lokey Capital, Inc, Morgan Stanley and Alvarez & Marsal North America, LLP.

As a result of the plan of reorganisation, a newly constituted board of directors has been appointed, consisting of Harald Thorstein, Kjell-Erik Østdahl, Scott D. Vogel, Peter J. Sharpe, Eugene I. Davis and Birgitte Ringstad Vartdal. John Fredriksen will act as chairman.

Furthermore, in accordance with its new reporting obligations, Seadrill has stated that it will issue its next earnings report in November 2018, which will include half year and third quarter 2018 results and reflect fresh start reporting.

Having successfully emerged from bankruptcy, Seadrill, with a young and modern drilling fleet, is looking to secure more contracts and to stabilise its revenues. To this end, it has begun talks with other major oil service companies, including Schlumberger Limited, to explore strategic collaboration opportunities. And with a rise in commodity prices due to strong demand and Organization of the Petroleum Exporting Countries (OPEC) production cuts, the outlook for drilling and oilfield services companies is looking bright.

Mr Fredriksen concluded: “We are pleased to be emerging from Chapter 11 and moving forward with a solid financial foundation on which we will continue to grow and strengthen our business.”

Fraser Tennant