Rig firm Seadrill warns shares to have little value after restructuring

The West Phoenix oil platform, operated by Seadrill Norge AS, right, stands with other unused platforms in the Port of Cromarty Firth in Cromarty, U.K.
Matthew Lloyd | Bloomberg | Getty Images

Rig firm Seadrill warned shareholders on Tuesday that their stock will lose almost all of its value as the Norwegian company prepares for potential bankruptcy proceedings to restructure $14 billion in debt and liabilities.

Shares in what was once the crown jewel in shipping tycoon John Fredriksen's empire have already fallen 95 percent in the past three years as low oil prices prompted drastic spending cuts by energy companies, hammering rig rates.

News of potential further damage to the stock sent Seadrill's shares plunging early on Tuesday, trading 40 percent lower at 8.4 crowns as of 0705 GMT.

The company said its banks and other lenders had agreed to extend restructuring talks by three months to July 31. In February Seadrill had warned that Chapter 11 bankruptcy protection was a risk.

"We currently believe that a comprehensive restructuring plan will require a substantial impairment or conversion of our bonds, as well as impairment, losses or substantial dilution for other stakeholders," Seadrill said in a statement on Tuesday.

"As a result, the company currently expects that shareholders are likely to receive minimal recovery for their existing shares ... We expect the implementation of a comprehensive restructuring plan will likely involve schemes of arrangement or Chapter 11 proceedings, and we are preparing accordingly."

Extending the deadline of the talks will allow additional time to negotiate with banks as well as potential new investors, the company said.

Fredriksen, Seadrill's chairman and top owner with a 23.6 percent stake, is still involved in the restructuring talks, Chief Executive Per Wullf told Reuters.

"They are still part of it," Wullf said, referring to Fredriksen and his family holding company Hemen, which owns multi-billion dollar stakes in industries ranging from fish farming to oil tankers and real estate.

The CEO declined to say whether Hemen or Fredriksen were prepared to inject cash as part of the restructuring.

"I can't say anything more about that now. We're in the middle of negotiations," Wullf said.

Seadrill is negotiating with more than 40 banks, including Norway's DNB, Sweden's Nordea and Denmark's Danske Bank, as well as with bondholders and several rig-building yards.