Seadrill Ltd (NYSE: SDRL) Struggles To Save Its Balance Sheet


Seadrill Ltd (NYSE:SDRL) turns out to be the most indebted offshore driller and as one would expect,  the company’s management isn’t amused by that distinction. To try and repair its highly leveraged balance sheet, the company recently got its lenders to agree to some debt amendments that allow it some breathing room.

What happened?

Seadrill Ltd (NYSE: SDRL)’s lenders agreed to extend the maturity period of the company’s three nearest debts. As such, the driller has gained more time to repay the loans. The time relief is important considering that demand for offshore drilling services have weakened amid recent fallouts in crude oil prices. This has adversely impact Seadrill’s revenues and profits, but marked recovery in the crude oil prices is expected as major oil producing countries ponder output cuts to take out the oil glut that has damaged prices.

The agreement that Seadrill has reached with its lenders affects debts totaling about $3 billion.

The debt amendment details

According to the agreement, two credit lines totaling about $950 million that were due in June 2016 and December 2016 have been pushed back by several months. As such, the June 2016 debt will now become due in December 2016 and the December 2016 debt will now become due in May 2017.

In another due-date alteration, $2 billion debt of Seadrill’s subsidiary called North Atlantic Drilling Ltd that was due in April 2017 has been pushed back to June 2017.

The debt amendment deal also requires Seadrill to maintain liquidity of at least $250 million and not to draw from its revolving credit facility.

The deal doesn’t change everything

Although Seadrill Ltd (NYSE: SDRL) has secured more time to repay the various debts under the amendment deal, the agreement doesn’t lower the amount that the company has to repay its creditors. Seadrill had about $11.1 billion in debt that bears interest at the end of 2015.

The amendment of the debt terms comes just after Seadrill Ltd (NYSE: SDRL) recently monetized its stake in SapuraKencana for about $195 million in another measure aimed at improving the balance sheet leverage.


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