As of June 30, 2017, Seadrill (SDRL) has a total interest-bearing debt of $9.3 billion, similar to the previous quarter. Of this, $3.7 billion is short-term debt. The remaining $5.2 billion is long-term debt. Seadrill has a cash balance of $1.3 billion, which brings the company’s net-interest-bearing debt to $7.9 billion.
Seadrill is in the process of restructuring its heavy debt. In July, Seadrill reached an agreement with its banking group to extend the “long stop date” to September 12, 2017. The company also extended two credit facilities, which matured in August to mid-September. This extension provides Seadrill time to finalize negotiations and prepare for Chapter 11 filing. The company has also insulated its entities, Seadrill Partners (SDLP), CEMEX, and Archer from the risk of default caused by chapter 11 filing.
The company is negotiating with the company’s key stakeholders and prospective new money investors to finalize agreements, and if concluded, the company will raise $1 billion in new capital, five-year extensions to its bank facilities, deferral of amortization, and a conversion of bonds to equity. Seadrill expects that shareholders are likely to receive minimal recovery for their existing shares.
In the offshore drilling (XLE) industry downturn, which started in late 2014, Seadrill and Ocean Rig have been among the hardest-hit companies in the peer group, which also includes Diamond Offshore (DO), Noble Corporation (NE), Transocean (RIG), and Rowan Companies (RDC). Ocean Rig has already applied for restructuring under Chapter 11.