Diamond Offshore Drilling filed for bankruptcy protection in Texas on Sunday, after the company recently skipped making an interest payment and said it had retained restructuring advisers.
The Houston-based contract drilling company’s filing, one of 15 of its group companies seeking protection under Chapter 11, said day rates and demand for its services had worsened precipitously this year amid a price war between OPEC and Russia and the steep drop in oil demand caused by the coronavirus pandemic.
Diamond explained that it intends to use the proceedings to restructure and strengthen its balance sheet and achieve a more sustainable debt profile.
The filing comes as the five biggest U.S. and European firms have cut spending an average of 23% in response to the drop in oil demand caused by the coronavirus pandemic. The companies are Exxon Mobil Corp, Royal Dutch Shell BP PLC , Total and Chevron Corp.
Global spending on oilfield equipment and services is forecast to fall 21% this year to its lowest level since 2005. Oil futures prices last week closed below $0 for the first time in history.
Diamond had recently drawn $400 million under a revolving credit facility. But it said “the financial and operational conditions of the Diamond Offshore Group Companies have continued to deteriorate in the weeks following such responses.”
Marc Edwards, President and Chief Executive Officer, said: “After a careful and diligent review of our financial alternatives, the Board of Directors and management, along with our advisors, concluded that the best path forward for Diamond and its stakeholders is to seek Chapter 11 protection. Through this process, we intend to restructure our balance sheet to achieve a more sustainable debt level to reposition the business for long-term success”.