Pacific Drilling CEO steps down after almost a decade in position

Offshore drilling company Pacific Drilling has informed that its CEO Christian J. Beckett has stepped down from his positions as CEO and as a member of the Board to pursue other opportunities.

The company, which provides ultra-deepwater drilling services to the oil and natural gas industry, announced that Paul T. Reese, the Company’s current Executive Vice President and Chief Financial Officer, has been promoted to serve as Chief Executive Officer.

John P. Boots, the Company’s current Senior Vice President – Finance and Treasurer, has been promoted to serve as Senior Vice President and Chief Financial Officer.

Also, Richard E. Tatum, the Company’s current Vice President and Controller, has been promoted to serve as Senior Vice President and Chief Accounting Officer.

According to Pacific Driller, Beckett has agreed to make himself available to assist during the transition.

Paul Reese, the new CEO joined Pacific Drilling in October 2008 and was appointed Pacific Drilling’s Executive Vice President and Chief Financial Officer in February 2015. He was named Senior Vice President and Chief Financial Officer in February 2014, and previously served as our Vice President and Controller.

Reese has over 20 years of experience in the oilfield services and E&P space.

Cyril Ducau, the Company’s Chairman of the Board, stated, “We sincerely appreciate the many invaluable contributions that Chris has made during his nearly 10 year tenure with the company. The entire Board joins me in expressing our gratitude and appreciation to Chris for his service, and we wish him all the best in his future endeavors.

“Paul has served the Company well in a number of senior level roles, most recently for the last three and a half years as our Chief Financial Officer, and we have every confidence in his ability to take on the role of Chief Executive Officer during this challenging time for our Company. John and Richard have done outstanding jobs in their current roles, and we congratulate them both on their promotions.”

Debt woes

The CEO resignation comes as Pacific Drilling is working with bondholders to extend the maturity date of a $439 million bond, originally set to mature in December 2017. The company has proposed to extend the maturity to June 2018.

The company started soliciting the bondholders consent for the extension early in July saying the extension would give it time to negotiate a refinancing transaction or undertake a holistic restructuring of its $3 billion debt with all of its creditors

On July 20, Pacific Drilling said that at the early consent deadline, the company had received consents of bondholders comprising less than 66 2/3% of the aggregate principal amount of the bonds.

At the time, the company said that proceeding with the maturity extension by way of an out-of-court amendment of the indenture was conditioned on receipt of valid consents from noteholders holding at least 95% of the outstanding principal amount of the Notes which is the minimum threshold condition.

The minimum threshold condition was not satisfied at the early consent deadline. The driller on July 20 said and the solicitation would expire at 5:00 p.m. (eastern time) on August 2, 2017, unless extended or earlier terminated by the company.

Offshore Energy Today has reached out to Eirik Røhmesmo, a Clarksons Platou Securities AS analyst covering Pacific Drilling, asking whether the Pacific Drilling CEO departure was linked to the expected announcement of the outcome of the meetings with bondholders.

Røhmesmo said: “As Pacific Drilling has been in dialog with stakeholders behind closed doors for some time it is of course pure speculation of what is the trigger for Chris Beckett stepping down.

He added: “As we wrote in a recent report, we see partial debt equitization as the most likely outcome through a financial restructuring to create a going concern. This scenario would heavily dilute existing shareholders.”

In its report dated July 5, Clarksons pointed out that out of the seven rigs in Pacific’s fleet, there was only one high-margin contract left -the Sharav drillship working with Chevron.

“The Sharav is operating with Chevron in the US GoM at USD 551k per day through Q3-19. Other than this, PACD has the Bora and Scirocco on short-term contracts at tight margins while the four remaining drillships are warm stacked. PACD is therefore more or less dependent on only one rig’s cash flow to service its debt,” Clarksons said in the report last month.

The analyst company has also highlighted the fact that Pacific Drilling has “always been seen as a likely take-over candidate.”

“Over the recent time period however, the elevated debt level has been a hurdle that probably has limited take-over interest. Upon the creation of a sustainable financial platform with significant equity value, the high spec and low age of the fleet could fit well into a larger company with growth or modernization plans,” the Clarksons report from July 2017 said.

Offshore Energy Today has also reached out to Pacific Drilling, seeking comment. We will update the article if we get a response.

Departure not abnormal

Also, commenting on the Pacific Drilling news, a Norway-based offshore rig broker, who wished to remain anonymous due to the sensitivity of the topic, said: “While we are not able to speculate on the real reason why Mr. Beckett left the company, it is most likely a combination of several issues including: new direction for the company; the impending restructuring; pressure from shareholders/lenders; the fact that he has been there for 10 years; etc.

“This type of thing is not abnormal in a restructuring where creditors take over.”

“Pacific Drilling may find itself in a similar position to Vantage or possibly Ocean Rig (although their future status is still fuzzy). There is the possibility they will be acquired, but all this depends on what happens with the bondholders. They will likely shed themselves of a lot of debt, and as long as they are capitalized for the next two years or so and assuming they can get their costs down, they should be able to hold out. As they are pure-play UDW, however, they will have some challenges in the months/years to come,” the rig broker said.

Expected 2Q net loss

As previously reported, coinciding with the early consent solicitation on July 5, 2017, the driller also issued a forecast for its second quarter results which will be released by mid-August.

The company said it expected to report a drop in contract drilling revenue for the second quarter of the year, compared to the first quarter, when it releases its results in August.

According to Pacific Drilling, contract drilling revenue for the second quarter 2017 is expected to be in the range of $66.0 million to $68.0 million, compared to first quarter 2017 contract drilling revenue of $105.5 million.

The driller said the decrease in revenues would have resulted primarily from the Pacific Santa Ana rig being off-hire throughout the second quarter 2017, compared to the first quarter 2017, in which it earned revenue until completing its contract on January 31, 2017.

The company expects a net loss for the second quarter 2017 in the range of $130.0 million to $140.0 million, compared to a net loss for the first quarter 2017 of $99.8 million and net income of $8.2 million for the second quarter 2016.

Pacific Drilling’s cash balance, including $8.5 million in restricted cash, totaled $416.6 million as of June 30, 2017, and its aggregate outstanding principal amount of indebtedness was $3.0 billion (after accounting for the impact of group consolidation).

The company expects to release its second quarter 2017 results in the first half of August and will not be holding an earnings conference call.

Offshore Energy Today Staff