Pacific Drilling latest rig operator to file for Chapter 11 bankruptcy
New York-listed Pacific Drilling is the latest rig operator to file for a voluntary Chapter 11 bankruptcy in the US to get out of a major debt. Several other rig operators have made a similar move since the beginning of the Covid-19 pandemic.
The company has struck an agreement with its biggest lenders to eliminate USD 1.1 billion in outstanding bond debt through annulment and conversion of debt into equity in the reorganized company.
With USD 120 million in cash and seven high-specification drillships, Pacific Drilling intends to continue its worldwide operations as usual and, subject to court approval, pay all obligations incurred during the Chapter 11 case in full, the company states.
“This restructuring is intended to enhance our financial flexibility by eliminating our entire prepetition debt and cash interest burden. We expect to emerge from this process in a stronger position to compete in today’s challenging, lower-commodity-price environment”, says CEO Bernie Wolford.
He expects to exit the procedure by year-end with access to new capital in the form of a USD 80 million exit facility and with approximately USD100 million in cash.
Pacific Drilling is the fourth rig operator to file for bankruptcy in a short period of time, following similar moves by Valaris, Diamond Offshore and Noble Corp earlier this year.
According to information on the company’s website, four of the seven drillships are currently “smart stacked”, with thus far only one of those four vessels having work planned in 2021.
Rig operators struggling
Since the beginning of 2020, the pandemic and the resulting oil crisis have caused significant disruption in world economies and led to a substantial decline in the oil price. A barrel of oil (Brent) currently costs 37 dollars, compared to about 66 dollars at the start of the year.
To protect their balance sheets, oil producers have drastically scaled back investments in exploration and production, causing demand for drill rigs to drop.