Seadrill, a Norwegian rig firm, warned shareholders on Tuesday that their stock will lose just about all of its value as the company prepares for potential bankruptcy proceedings to restructure $14 billion in debt and liabilities.
In the past three years shares in what was once the crown jewel in shipping tycoon John Fredriksen’s empire have fallen 95 percent, as low oil prices have prompted drastic spending cuts by energy companies in an effort to lower rig rates.
News of even more potential damage to the stock has caused Seadrill’s shares to plunge early on Tuesday, trading 40 percent lower at 8.4 crowns as of 0705 GMT.
The company stated that its banks as well as other lenders have agreed to extend talks of restructuring by three months to July 31st. In February Seadrill warned that Chapter 11 bankruptcy protection was a risk.
“We currently believe that a comprehensive restructuring plan will require a substantial impairment or conversion of our bonds, as well as impairment, losses or substantial dilution for other stakeholders,” Seadrill said in a statement on Tuesday.
“As a result, the company currently expects that shareholders are likely to receive minimal recovery for their existing shares … We expect the implementation of a comprehensive restructuring plan will likely involve schemes of arrangement or Chapter 11 proceedings, and we are preparing accordingly.
By extending the deadline of the talks, more time will be allowed to negotiate with banks as well as potential new investors, the company said.
Seadrill’s chariman and top owner, Fredriksen has 23.6 percent at stake and is involved in the restructuring talks, Chief Executive Per Wullf told Reuters.
“They are still part of it,” Wullf said, referring to Fredriksen and his family holding company Hemen, which owns multi-billion dollar stakes in industries ranging from fish farming to oil tankers and real estate.
The CEO did not say whether Hemen or Fredriksen were willing to inject cash as part of the restructuring.
“I can’t say anything more about that now. We’re in the middle of negotiations,” Wullf said.
Currently Seadrill is negotiating with more than 40 banks, some of which include Norway’s DNB, Sweden’s Nordea and Denmark’s Danske Bank, as well as with bondholders and several rig-building yards.
Article written by HEI contributor Lydia Ezeakor.