Drillship and semisubmersible operator Diamond Offshore Drilling Inc. (NYSE: DO) on Sunday filed for Chapter 11 bankruptcy protection in order to strengthen its balance sheet and reorganize its debt. In its announcement of the filing, the company said it had sufficient capital to fund its operation and would not require additional financing at this time.
Diamond Offshore is majority-owned by Loews Corp. (NYSE: L), and the filing includes 11 subsidiaries of Diamond. The drilling firm said it expects to file its 10-K quarterly report on or about May 4 but that it will not issue a press release or hold a conference call to discuss the results.
According to Loews most recent 10-K, Diamond Offshore had outstanding $2.0 billion of senior notes, maturing at various times from 2023 through 2043. As of February, Diamond Offshore had no outstanding borrowings under its $225 million revolving credit facility maturing in October of 2020 or its $950 million revolving credit facility maturing in October of 2023. At the time of the filing, Diamond expected to have drawn $950 million under its credit facilities to “meet short term liquidity requirements.”
Marc Edwards, president and chief executive officer, said.
Through this process, we intend to restructure our balance sheet to achieve a more sustainable debt level to reposition the business for long-term success. Diamond remains focused on maintaining its high standards as it relates to safety and operational excellence during the chapter 11 process. Our clients and vendors should expect business as usual across our organization as our world class team will stay steadfast on our collective goal of providing superior operations that clients have come to expect from Diamond Offshore.
The company has a fleet of 15 offshore rigs, comprised of 11 semisubmersibles and four drillships. All four drillships are currently operating in the ultra-deepwater (greater than 7,500 feet) of the U.S. Gulf of Mexico. Of six ultra-deepwater semisubmersibles, one is cold-stacked and the others were all in operation, as of the fourth quarter of 2019.
Offshore drillers face a more uncertain future than most other energy-related businesses. As producers like Exxon, Chevron and Shell work to maintain liquidity, new offshore spending is reined in and drillers either must cut their prices or forgo business.
Since the beginning of 2019, Diamond’s stock price had dropped by 90% as of last Friday’s close. Noble Corp. (NYSE: NE) had tumbled by a similar amount and Transocean Inc. (NYSE: RIG) had lost 86%.
Loews, which owns approximately 53% of Diamond, said in a Monday filing with the U.S. Securities and Exchange Commission that as of Sunday’s bankruptcy filing by Diamond, Loews will no longer consolidate Diamond’s results in Loews financial statements. As of the end of December, Loew’s carrying value in Diamond was $1.5 billion, but the company said it expects to record a “significant non-cash” second-quarter loss on its stake in Diamond.
Diamond’s shares traded down about 61% in Monday’s premarket session to around $0.36 before being halted.
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