After months of operating what it called “precipitously” Diamond Offshore Drilling took the plunge, filing for Chapter 11 bankruptcy in Texas.
In a Chapter 11 petition filed at the U.S. Bankruptcy Court for the Southern District of Texas (Houston), the rig contractor controlled by Loews Corp. L said operating conditions had worsened “precipitously in recent months,” according to a report by Forbes.
Diamond owns rigs that can drill in water over two miles deep. But the current slump in prices, triggered by the collapse of OPEC+ and the subsequent crash in oil demand in the wake of the coronavirus or Covid-19 pandemic, has hammered oil and gas exploration at sea.
Offshore oil exploration and production (E&P) is often the most expensive industry drilling activity and not economically viable in many global production zones below $30 per barrel crude prices, a level global benchmark futures are currently well short of. Recent declines have seen Brent and WTI futures trade 60% and 80% lower since the start of the year.
Offshore wells also take much longer to drill and develop compared to U.S. onshore shale wells and competition among rig contractors is fierce when it comes to bagging business.
In its Bankruptcy Court filing (Chapter 11 petition case reference: 20-32307), Diamond said it has $5.8 billion of assets and $2.6 billion of debt, referencing fiscal Q4 2019 data. The document also said the company has around $434.9 million of cash on hand.
Depending on how the restructuring and pending bankruptcy unfolds, up to 2,500 jobs could be at risk at Diamond. It follows shale E&P firm Whiting Petroleum into bankruptcy, which filed its Chapter 11 petition on April 1 after its stock slumped 91% over the previous quarter. Whiting largely operated in Bakken and Three Forks Shale, along with substantial operations in its home-patch – the Denver-Julesburg Basin.
Source: Forbes