The offshore services business is the worst performing of the oilfield services sector, with shares of the 10 largest publicly traded down 77% since the start of the year.
Four of the seven largest offshore drillers - Diamond Offshore Drilling Inc, Noble Corp, Seadrill Ltd and Valaris Plc - have sought protection from creditors or begun debt restructuring talks that could lead to bankruptcy.
Two others are reaching out to their creditors. Pacific Drilling last month said it may need to modify terms of its debt, and was seeking alternative funding in the event creditors would not accept new terms. Shelf Drilling, the ninth largest by revenue, is seeking talks with creditors over loan covenants that take effect next year, executives said.
The latest offshore industry’s turmoil “is going to change things in many ways,” Odfjell Drilling Chief Executive Simen Lieungh said in an interview. “Existing players and the existing structures will probably not be there as today,” he said referring to companies scrapping rigs.
The last downturn was cushioned by help from oil producers. Between 2014 and 2016, as crude fell to $26 per barrel from over $100, oil majors spread work among drillers to keep exploring off the coasts of Brazil, Mozambique and in the Mediterranean. That allowed drillers whose rig contracts were canceled to pick up some jobs, albeit at lower lease rates.
The offshore industry was financially stronger then. Many had entered that downturn with large order backlogs and held contracts with lease rates higher than today’s, said Jorn Madsen, CEO of Maersk Drilling.
Many of the offshore drillers are scrapping or retiring vessels, having concluded it may be years before they are needed again. Valaris plans to scrap 11 rigs and put aside nine others, estimating it may take two years before they are needed again.
Source: Reuters
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