Christine Besset<\/a>, who grades the service companies.<\/p>\n<\/p>\n
\u201cThere is just too much capacity in the market versus the demand and the project pipeline,\u201d Besset said. \u201cIt\u2019s very likely that there will be more debt restructurings for those offshore drillers.\u201d<\/p>\n
<\/p>\n
A representative for Transocean declined to comment. Representatives for Noble, Diamond Offshore, Valaris, Seadrill and Pacific Drilling didn\u2019t immediately respond to requests for comment.<\/p>\n
<\/p>\n
Read more: Pacific Drilling may file Chapter 11 bankruptcy a second time<\/p>\n
<\/p>\n
Offshore companies are filing for Chapter 11 at higher rate this year in part because some of them escaped the last downturn that drew onshore peers into bankruptcy. At the time, many offshore service firms had long-term contracts for large projects that gave them a lifeline even as oil prices collapsed.<\/p>\n
<\/p>\n
During the heady days of $100 oil, service companies could lease out a technologically advanced ship for $600,000 a day. The average day rate is now about $300,000, according to Evercore ISI. In some cases, explorers such as Exxon Mobil Corp. and Murphy Oil Corp. are renting drillships for less than $200,000 a day<\/p>\n
<\/p>\n
Producers have shifted to lower-cost shale production in recent years because of its faster timeline from drilling to steady oil production. That business can also more easily satisfy investors\u2019 interest in companies that generate positive cash flow and have manageable debt loads, though oil prices have fallen so far this year that even some shale drillers like Chesapeake Energy Corp. and Whiting Petroleum Corp. have been forced to file for bankruptcy.<\/p>\n
<\/p>\n
Transocean, the world\u2019s biggest deepwater rig owner, has led the offshore industry in slimming down by scrapping more than 50 of its own rigs. But shrinking businesses still haven\u2019t been enough to wipe out a massive glut of gear. After the industry hit its peak of 322 rigs drilling for oil in more than 400 feet of water in 2014, the number of vessels is down by about one-third this year to 221, according to Evercore ISI.<\/p>\n
<\/p>\n
\u201cThey were already in bad shape and had too much debt for their cash generation ability,\u201d Besset said. \u201cCoronavirus just precipitated the inevitable issues.\u201d<\/p>\n
<\/p>\n
Paradoxically, more bankruptcies may be a positive for the industry overall, said Fredrik Stene, an analyst at Clarksons Platou Securities AS who follows offshore service companies. Filings allow companies to cut debt when they otherwise wouldn\u2019t be able to. Many firms pledge assets to get access to credit, meaning that they can\u2019t easily sell supplies to reduce their obligations outside of Chapter 11, he said.<\/p>\n
<\/p>\n
\u201cThis is what the industry needs,\u201d Stene said. \u201cThe state we\u2019re in right now is not a state where the capital structure of many oil services companies will be sustainable.\u201d<\/p>\n
<\/p>\n
Hot credit markets have let firms in troubled industries like cruising and air travel borrow billions, but most offshore service companies won\u2019t be able to refinance their debt without a trip to bankruptcy court because they can\u2019t dangle the high interest rates and hefty collateral packages investors now demand to lend to risky companies, Stene said.<\/p>\n
gCaptain<\/p>\n","protected":false},"excerpt":{"rendered":"
The debacle, triggered by the pandemic-driven drop in oil prices, has already claimed some of the biggest companies that supply rigs, transportation and other support services to deep-water drillers. Noble Corp. and Diamond Offshore Drilling Inc. have filed for Chapter 11 since the start of the pandemic-driven oil downturn, while Valaris Plc has warned it …<\/p>\n","protected":false},"author":1,"featured_media":15876,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[56],"tags":[2068,7297,1732,10199,2095,4172,1131,87],"class_list":["post-15875","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-marine-world","tag-billion","tag-created","tag-crisis","tag-failures","tag-financial","tag-massive","tag-offshore","tag-risk"],"_links":{"self":[{"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/posts\/15875","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/comments?post=15875"}],"version-history":[{"count":0,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/posts\/15875\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/media\/15876"}],"wp:attachment":[{"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/media?parent=15875"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/categories?post=15875"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/tags?post=15875"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}