Rig company Seadrill, once the crown jewel in the business empire of shipping tycoon John Fredriksen, will present a refinancing plan in the first half of this year to address its $10 billion debt, it said on Thursday.
At the height of the oil price boom the company was the world’s largest offshore driller by market capitalisation, but it is now struggling as oil companies implement drastic cost cuts to counter the 70 percent decline in crude prices since mid-2014.
Seadrill’s share price has fallen by 93 percent over the past two years, against a 1 percent decline for the Oslo benchmark index over the same period, but it jumped by 10 percent on Thursday’s announcement.
Key to the refinancing plan will be the response of Seadrill’s biggest shareholder, Fredriksen’s Hemen Holding, which owns a little more than 24 percent of the company. Fredriksen has previously put up his own cash when other companies in his group have encountered financial problems.
“(It is) positive for the company that a financing plan will be announced in H1 (2016), but the dilutive risk to the shares is huge in a credit event,” Carnegie analyst Johan Stroem said.
“The company continues to cut costs, which is very positive, and they are in dialogue to delay delivery of new-build jackups (self-elevating rigs) in China,” he said, adding that he did not expect to change his sell rating on the stock.
RIGS UNDER CONSTRUCTION
Seadrill has 14 rigs under construction at Asian yards, potentially adding to the company’s debt burden when they are completed in the coming years.
Out of those 14 rigs, eight are under construction at Dalian shipyards in China, two at DSME in South Korea, two at Samsung, also in South Korea, one at COSCO in China, and one at Jurong in Singapore.
Seadrill has struck deals to delay deliveries of several units and is in talks with the yards to push back even more of these, it said, including eight jackup rigs being built in China.
In January Seadrill CEO Per Wullf told Reuters the company was talking to its owners and lenders to shore up its balance sheet but that no deadline had been set.
“It’s banks, bonds and equity. It’s the entire way around,” Wullf said of the negotiations.
Seadrill’s earnings before interest, tax, depreciation and amortisation (EBITDA) fell to $513 million in the fourth quarter, against $672 million a year ago and expectations for $520 million in a Reuters poll of analysts.
The company expects EBITDA to drop to $450 million in the first quarter of this year.