Pacific Drilling has filed for Chapter 11 bankruptcy in the Southern District of Texas. The company is, technically, registered under the laws of Luxembourg, though it has its head office in west Houston. This is the second time in three years that it has filed for bankruptcy.
The company has $1.1 billion in debt, due in 2023 and 2024. Almost 75% of the noteholders have agreed to write off all the debt in exchange for all the equity in the newly-reorganized company and an $80 million exit facility.
The company first filed for bankruptcy in November 2017. It exited one year later. The company converted $1.85 billion of debt to $500 million of new equity. It also refinanced $1.2 billion of debt with $1 billion of loan notes that are now being written off.
The company was formed in 2006 and went public in 2011. It operates seven ultra deepwater drill ships, capable of operating in 10,000 ft of water. It currently employs 443 people around the world. At its peak in 2013, the market value of its equity was $2.7 billion.
The current fleet status highlights the sorry state of affairs of the company and the drilling industry generally;
- Four of the seven ships are smart stacked.
- One is finishing a contract with Equinor/Total by early November.
- Due to Covid-19, one is operating on stand-by at 35% of the contractual dayrate, though the customer, Petronas, said the rig would resume January 1, 2021.
- One drillship is idle in the Gulf of Mexico but has a 450-day contract with Murphy Oil, commencing in the second quarter of 2021.
The declaration in support of the Chapter 11 petitions was filed by CFO James Harris. Back in June, he announced his resignation, with his last day expected to be September 14, 2020.
Other drilling bankruptcies
Other drilling contractors that have filed for bankruptcy include Noble Corporation (July 2020), Diamond Offshore (April 2020) and Valaris (August 2020). Transocean, the biggest drilling contractor, is evaluating strategic alternatives and may yet be forced into bankruptcy by dissident bondholders.