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Seadrill Affiliate Emerges from Chapter 11 Bankruptcy

Seadrill Partners emerges from bankruptcy
One of Sea Drill Partners' drillships (Seadrill Partners)

Published May 25, 2021 5:33 PM by The Maritime Executive

Seadrill Partners, an affiliate company formed by Seadrill to own, operate and acquire offshore drilling rigs, has emerged from Chapter 11 after completing its reorganization plan. Seadrill Partners filed for Chapter 11 bankruptcy in December 2020 as part of more than two dozen companies affiliated with John Fredriksen’s offshore rig operator Seadrill Limited, which itself filed for bankruptcy two months later.

The companies, like many in the sector, cited the ongoing weakness in the oil sector that had been compounded by the pandemic in 2020 resulting in further pressures that lead to their bankruptcy filings. Utilization of their drilling rigs and other equipment declined in 2020 based on the oversupply of oil driving day rates down to unsustainable levels. The companies said that restructuring their finances would permit them to emerge more agile, resilient, and sustainable.  

Under the terms of the plan agreed to for Seadrill Partners, the company emerges debt free from bankruptcy. The company said that it believes it is “well positioned to secure drilling contracts and invest in its high specification ultra-deepwater, harsh environment and tender rig fleet going forward.”

The company’s existing $2.8 billion in debt was converted to new equity shares. Just under a third of the new shares were issued to the holders of the previous senior secured debt while 68 percent of the new stock was issued to the holders of secured claims against the company. The previous equity in the company was canceled and replaced with 20 million shares of the new common stock. The plan resolved all potential claims against the company alleged by related parties, secured and unsecured creditors.

A new management agreement was also put into place along with a new board of directors. Services agreements were entered into for the management of the company’s offshore drilling units, and a transition services agreement was agreed to with the company’s prior manager that provides for a transition. 

A wave of financial difficulties affected the entire offshore drilling sector in 2020. Competitors Valaris, Noble, Pacific Drilling, and Diamond Offshore all filed for Chapter 11 in 2020. Several of the companies have also successfully emerged from bankruptcy completing their own refinancing. 

Seadrill followed its affiliates into bankruptcy in February 2021. The company recently said as part of its first quarter update that its financial restructuring was continuing to make good progress through productive discussions with all parties involved. However, they warned that the comprehensive restructuring plan will require a substantial impairment and losses for current shareholders, including John Fredriksen. Seadrill said that it currently expects that shareholders are likely to receive minimal recovery for their existing shares, although the terms of a final agreement for the parent company are yet to be announced. The 2021 bankruptcy was the second for Seadrill which had also gone through bankruptcy proceedings in 2018.