Shares in Seadrill Ltd (NYSE:SDRL) vaulted higher yesterday after Bloomberg said the company’s chairman, John Fredriksen, who is also its largest shareholder and a billionaire, was willing to contribute as much $1.2 billion towards the financial restructuring of the debt-laden company.
The Seadrill Ltd (NYSE:SDRL) stock closed 23.72% higher at $2.66, with 57.64 million shares traded.
The company did not comment other than a terse “the Company remains in discussions with its stakeholders regarding its refinancing and recapitalization plans and there are no material developments to disclose.”
Seadrill Ltd (NYSE:SDRL) suffering under a bloated debt burden
The company’s balance sheet is weighed under by over $9 billion in debt, and a financial restructuring is inevitable if the offshore driller is to survive the current difficult conditions in the industry.
According to Barron’s, Seadrill has the largest debt load amongst its peers , and of particular concern is the fact that about $2.4 billion of that will come home to roost within the next 12 months.
Making matters worse, a number of its vessels are likely to come off contract during that period, leading to a crunch in operating revenue.
Last week, Statoil ASA(ADR) (NYSE:STO) reportedly cancelled its contract for Seadrill’s majority owned North American Drilling’s West Epsilon jack-up rig two months before expiration.
(In a separate development, shares in leading offshore driller Transocean LTD (NYSE:RIG) shuddered yesterday after Indian conglomerate Reliance Industries Ltd terminated a contract for one of the drilling ships ahead of schedule. )
On the plus side, Seadrill has one of the most modern fleets, and if it is left standing after the passage of the current cyclical downturn in the industry, shareholders would reap rich benefits.
Technically, Seadrill is looking bullish, having made a volume-supported thrust higher over the last five sessions.
Its bullish trend will be confirmed if it penetrates the 200 day SMA at $3.00.