Photo: West Hercules; Source: Equinor

Seadrill closer to Chapter 11 as agreement with creditors expires

Forbearance agreements entered into by offshore drilling contractor Seadrill Limited with certain creditors in respect of the group’s senior secured credit facility agreements have now expired.

Seadrill said that the term of the forbearance agreements expired on 29 January 2021 and that the creditors with which forbearance agreements were entered into were no longer prevented from taking actions in respect of events of default that may arise under the senior secured credit facility agreements as a result of the group not making interest payments under the group’s senior secured credit agreements.

Seadrill added that it was still ready to carry out a comprehensive restructuring of its balance sheet. Such restructuring may involve the use of a court-supervised process.

The company continues to engage in constructive discussions concerning potential further forbearances and to finalise the heads of terms of a comprehensive restructuring of its balance sheet.

While no agreement has been reached at this point it is expected that potential solutions will lead to significant equitization of debt which is likely to result in minimal or no recovery for current shareholders”, the company said.

The forbearance agreements in question were agreed to with certain creditors in respect of nine out of the group’s twelve senior secured credit facility agreements in late December 2020.

Forbearance was not agreed for certain events of default or termination events that may arise under the three remaining senior secured credit agreements, the company’s New Secured Notes or leasing arrangements for the West Hercules, West Linus, West Taurus, and a bilateral guarantee facility with Danske Bank.

Without a forbearance in respect of these arrangements, the creditors have the right to accelerate or otherwise enforce their rights under them.

Also in December, Seadrill Partners, which is 35 per cent owned by Seadrill Limited, filed for voluntary petitions under Chapter 11 of the Bankruptcy Code to preserve value and to continue the operation and marketing its assets.

Bad luck for Seadrill does not end there as an incident onboard a Seadrill-owned drillship working for Kosmos Energy in the U.S. Gulf of Mexico resulted in the death of one offshore worker late last month.

An incident occurred on the West Neptune drillship at 13:30 Central Standard Time on 24 January 2021, which resulted in the fatality of an Allrig employee.