Seadrill agrees to debt-to-equity exchange

Offshore drilling services provider Seadrill Ltd. agreed to a debt-to-equity exchange with certain bondholders as part of its broader debt restructuring plan.

The company agreed to issue a total of 7.5m new equity shares having par value of $2 per share in exchange for $50m principal amount of the 5.625% Senior Unsecured notes due 2017.

Settlement of this offer was expected to occur on 13 June 2016, upon which the company would have a total of 508,444,280 shares of its common stock outstanding.

Source: Seadrill Ltd. Press Release

Seadrill 1Q 2016 Results

Offshore drillship operator Seadrill Ltd. reported its 1Q 2016 results today. Key takeaways of the release are as follows:

  • Revenues for the first quarter of 2016 were $891m, a 28% decline as compared to previous year’s revenues of $1.2bn. The decline in revenues was attributed to lower day rates on its fleet which failed to offset higher fleet utilization during the quarter of 97%.
  • EBITDA for 1Q 2016 was $528m, a 26% decline vs. $715m in 1Q 2015, translating into an EBITDA margin of 59% vs. 57% previously.
  • Net Debt for 1Q 2016 decreased to $9.6bn from $11.4bn in March 2015.
  • Cash flow from operating activities for 1Q 2016 declined to $294m from $499m a year ago.
  • Seadrill, as part of its broader plan to refinance and recapitalize its business, extended the nearest three maturing borrowing facilities and amended certain covenants across all its secured debt.
  • Seadrill agreed not to draw on any of the $467m available to it under its revolving credit facilities as part of negotiations with lenders and agreed to increase its minimum liquidity covenant contained in its secured credit facilities from $150m to $250m.
  • The company deferred delivery on its new vessels; 2 ultra-water drillships, West Aquila and West Libra deferred until 2Q’18 and 1Q’19 respectively and 5 jack-ups deferred until 2017 and 3 until 2018.

 Company Guidance

For 2Q 2016, EBITDA is expected to be around $510m in anticipation of lower day-rates on certain vessels (West Tellus, Sevan Brasil & West Cressida) and on contract culmination for West Prospero, West Castor and West Hercules which offsets commencement of operation or higher utilization on vessels West Eclipse & West Phoenix

For FY 2016, the company expects to achieve cash cost savings of about $340m, of which $305m would be attributed to sustainable cost savings, and $35m toward deferred spending.

Source: Company Press Release


Statoil cancels rig contract with Seadrill

Norwegian oil explorer Statoil cancelled its rig contract with Seadrill after postponing work at its Aasta Hansteen field in the Norwegian Sea.

Seadrill’s drillship West Hercules was contracted for an assignment with Statoil’s Aasta oilfield commencing 1 July 2016, but the company took a decision to postpone drilling operations by one year to 2018.

Seadrill would receive a lump-sum payment of around $61m, plus dayrate and reimbursement of costs associated with demobilization of the rig.

On contract with Statoil since 31 January 2013, the rig had carried out an exploration campaign offshore Newfoundland in Canada for the past 18 months. The contract for West Hercules was originally due to expire on 31 January 2017.

Source: MarketWatch

Seadrill reaches agreement with its banking group

Seadrill Ltd., a provider of drilling services to E&P companies, reached an agreement with its banking group on restructuring its debt amid adverse market conditions.As part of the first phase of a broader restructuring plan, the company extended the maturities of the following credit facilities:

  1. The $450m credit facility originally maturing in June 2016; now extended until December 2016
  2. The $400m credit facility originally maturing in December 2016; extended until May 2017
  3. The $2bn NADL credit facility originally maturing in April 2017; extended until June 2017

Further, the company amended the following covenants, extending them to 30 June 2017:

  1. Reset its leverage ratios on its senior secured credit facilities to 6.5x between 1 January 2017 and 30 June 2017
  2. Adjusted the total equity to total assets ratio by excluding the effects of market values of its drilling units, whilst maintaining a minimum ratio of 30% for the stated period
  3. Suspended clauses on its credit facilities which required Seadrill to post additional collateral or prepay a portion of the outstanding borrowings based on a minimum value of its drilling units
  4. Increased its minimum liquidity requirement from $150m to $250m

Further, the company agreed to refrain from borrowing any undrawn commitments under its senior secured credit facilities.

The company aims to restructure its debt by the end of FY 2016.

Source: Company Press Release





Seadrill hires advisors to restructure debt

Bermuda-based offshore drilling rig provider Seadrill Ltd. hired Houlihan Lokey Inc. and Morgan Stanley to advise it on restructuring its debt worth $11bn. The process is expected to gain traction by June 2016.

According to sources, the company might opt for a debt-to-equity swap and a subsequent equity infusion of $1bn.

Seadrill, which provides rig services to upstream oil and gas companies, has seen a decline in its revenue as its clients have cut capex/drilling budgets.  The company has seen declining day rates and contract expiry on some of its vessels.

Source: Zacks Investment Research