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Measures taken by Transocean Ltd. to stave off a bankruptcy filing could be exactly what ends up sending the offshore drilling company into Chapter 11 alongside some of its biggest peers. The world’s largest owner of deep-water oil rigs recently engineered a bond swap to trim some of its $9 billion debt load and ease the crunch caused by slumping energy prices. But other creditors, led by Whitebox Advisors LLC and Pacific Investment Management Co., say the transaction amounts to a default because it pledges assets that Transocean already promised to them.
They’ve given the company until Dec. 1 to cure the default, according to a court filing. The creditors are seeking a settlement but would be prepared to demand immediate repayment of their debt if a deal cannot be reached, which could lead to Transocean filing for bankruptcy, according to people with knowledge of the matter. They asked not to be identified discussing confidential matters.
A spokeswoman for Transocean declined to comment beyond the company’s public court filings. Representatives for Pimco and Whitebox declined to comment.
Transocean has said in court papers that the default claim is baseless and should be dismissed. It called Whitebox “a dissident minority noteholder seeking to force the company into bankruptcy,” and said the default notice threatens “access to liquidity that is essential to the company’s continued successful operations.”
On paper, Transocean is in better shape than some of its rivals. Led by Chief Executive Officer Jeremy Thigpen and headquartered in Steinhausen, Switzerland, the company has enough liquidity and contracts to keep operating until 2023, according to industry watchers.
That stands in contrast to peers Diamond Offshore Drilling Inc., Valaris Plc and Noble Corp., all of which went bankrupt earlier this year. They’re in trouble in part because oil prices have slumped below $40 a barrel, where it’s hard to make a profit, and because offshore oil is among the most expensive to produce.
The Transocean dispute revolves around its August offer to swap various bonds for as much as $750 million in new notes maturing in 2027. The group of creditors, who own at least 50% of Transocean’s priority guaranteed notes maturing in 2025 and 2027, say the exchange is forbidden because the company issued new senior debt guaranteed by assets that were already to pledged to their existing notes.
They initially claimed the “fraudulent and coercive” exchange offer contained misleading statements, and sought to have the exchange halted entirely, according to a complaint filed in federal court. Judge George B. Daniels denied the request, and Transocean went ahead with the deal, extending the deadline. The company also filed a counter-claim against the creditor group, asking Judge Daniels to dismiss the default notice.
Interest Savings
Transocean ultimately collected $1.5 billion in tendered notes for $750 million of new 11.5% senior guaranteed bonds maturing in 2027, according to a statement. This allowed Transocean to cut about $826 million of debt and save about $32 million on interest, according to Fredrik Stene, an analyst at Clarksons Platou Securities AS. It issued $687 million of new 2027 notes, which traded Sept. 18 at 48.5 cents on the dollar, according to Trace data compiled by Bloomberg.
“If you were holding an existing priority guaranteed note, you are now in a position where you could see senior unsecured debt jump in front of you because they are guaranteed by a subsidiary that is closer to the assets,” Stene said in an interview. “You could argue that the current priority guaranteed notes have the most to lose.”
The dissenting noteholders, represented by the Milbank law firm and advisers from Evercore Inc., would like to see a restructuring of Transocean’s balance sheet -- in or out of bankruptcy -- that engages with all stakeholders, the people said. Representatives for Milbank and Evercore didn’t respond to requests for comment.
Bankruptcy Advantage
If Judge Daniels were to rule against the creditors, and the company manages to stay out of bankruptcy, it could still face a different kind of pressure, according to analysts.
Competitors like Valaris and Noble will have lower operational and debt costs as a result of going through Chapter 11, and thus be more able to compete on price. That’s significant in an industry that remains chronically oversupplied with too many rigs and not enough offshore drilling work generated by producers.
“This could create a scenario in which companies with more leverage coming out of the downturn may be at a disadvantage versus better-capitalized peers,” Scott Levine, a Bloomberg Intelligence analyst, said in a Sept. 21 note.
Source: Bloomberg
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Valaris Limited announced new contracts awarded subsequent to issuing the Company’s most recent fleet status report on February 21, 2023. Three-year contract with Petrobras for drillship VALARIS DS-8. The rig will be reactivated for this contract. The total contract value is approximately $500 million, including a $30 million mobilization fee. 100-day contract with a TotalEnergies affiliate for drillship VALARIS DS-12. The contract is expected to commence in second quarter 2023. 70-day contract with Beach Energy offshore New Zealand for heavy duty modern jackup VALARIS 107. The contract is expected to commence in third quarter 2023. The total contract value is approximately $26 million. President and Chief Executive Officer Anton Dibowitz said, “We are particularly pleased to have secured the award for preservation stacked drillship VALARIS DS-8, for a contract that is expected to generate a meaningful return over the firm contract term, and we remain focused on exercising our operational leverage in a disciplined manner. This most recent award represents the sixth contract awarded to one of our high-quality stacked floaters since mid-2021, and speaks volumes about our demonstrated track record of project execution when reactivating rigs.” Dibowitz added, “Following the reactivation of VALARIS DS-17 and DS-8, we will have ten floaters working across the golden triangle, including four drillships in Brazil, a market where we expect to see continued growth over the next several years.” Updated Guidance As a result of the contract awarded to VALARIS DS-8, which will require the rig to be reactivated from preservation stack, we are updating our first quarter 2023 and full-year 2023 guidance provided on our fourth quarter 2022 conference call on February 21, 2023. First Quarter 2023 Contract drilling expense is expected to increase by approximately $5 million to $385 million to $395 million. Adjusted EBITDA is expected to decrease by approximately $5 million to negative $5 million to breakeven. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $25 million to $30 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Full-Year 2023 Revenues are anticipated to be $1.8 billion to $1.9 billion, unchanged from the guidance provided on our fourth quarter 2022 conference call. Contract drilling expense is expected to increase by approximately $60 million to $1.49 billion to $1.59 billion. Adjusted EBITDA is expected to decrease by approximately $60 million to $180 million to $220 million. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $280 million to $320 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Capital expenditures are expected to increase by $60 million to $320 million to $360 million. Source: Valaris Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Seadrill Limited announced that the West Neptune has executed approximately six months of term extensions with LLOG Exploration Offshore, L.L.C in the US Gulf of Mexico. The extensions will commence in direct continuation of the existing term, and will keep the rig busy until Q3 2024, furthering Seadrill and LLOG’s long-term association. Total contract value for the extension is approximately $79 million. Source: Seadrill Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Semisub rig owner Dolphin Drilling has inked a new contract with Peak Petroleum in Nigeria for its 1974-built Blackford Dolphin. The firm contract, which follows the letter of award in January, gives the Euronext Growth-listed owner of three rigs the potential to extend the unit’s backlog by a minimum of 120 days and up to 485 days. The deal adds to and will be a direct continuation of the previously announced 12-month contract with General Hydrocarbon Limited (GHL). Øystein Stray Spetalen-backed company said the effective dayrate associated with the minimum firm period of the contract is $325,000, including the mobilisation fee. “The final award of the contract for Blackford Dolphin shows the opportunities in Nigeria at a strong dayrate, in addition to building on the backlog for the rig. It also underlines the attractiveness of our assets, and we look forward to returning to revenue-generating operations in 2023,” noted Bjørnar Iversen, CEO of Dolphin Drilling. Source: Dolphin Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
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