December 12, 2018 / 6:22 PM / 6 months ago

Parker Drilling files for pre-arranged Chapter 11 reorganization

(This version of the December 12th story corrects company name to Diamond Offshore Drilling from Diamondback Energy in eighth paragraph)

By Liz Hampton

HOUSTON (Reuters) - Oilfield services provider Parker Drilling Co (PKD.N) said it filed for bankruptcy protection on Wednesday under an agreement with a group of debtors that will allow it to quickly restructure.

The plan, which is subject to court approval, will reduce its funded debt by two-thirds and inject $95 million of equity capital through a backstopped rights offering, the company said in a statement. It expects to emerge from bankruptcy protection in early 2019, and the company’s management is anticipated to remain in place.

Drilling contractors have struggled to recover from a steep drop in oil prices four years ago. A recent step-down in global oil futures to nearly $61 a barrel is threatening to delay a long-predicted recovery for offshore service companies, which typically handle more expensive projects that require higher energy prices to turn a profit.

Houston-based Parker listed total debts of $695.5 million and assets of $937.2 million in its bankruptcy petition. The drilling company, which has not turned an annual profit since 2014, owes $585 million to unsecured bondholders, $2.18 million to National Oilwell Varco, $749,487 to Hi-Tech Tubular Service, and $388,800 to Schlumberger NV, according to its filing.

The company’s largest equity holders include Saba Capital Management, Brigade Capital Management, Dimension Fund Advisors and Whitebox Advisors.

In November, the company warned investors it might not be able to repay or refinance certain debts.

Parker said on Wednesday it expected its current cash flow and existing liquidity to support global operations as it restructures.

Rating service Moody’s Investors Service recently said downgrade risk remains elevated for offshore drillers including Diamond Offshore Drilling (DO.N), Ensco Plc (ESV.N), Transocean (RIG.N), Rowan Companies Plc RDC.N and Noble Corporation Plc (NE.N), as they face contract expirations and lower earnings.

Moody’s, as of September, had assigned Parker’s debt a junk rating with a negative outlook. The company’s debt was nearly seven times its adjusted earnings at mid-year, the ratings agency said.

Shares of Parker Drilling were down 62 percent at 42 cents early Wednesday afternoon.

Reporting by Liz Hampton; Editing by Richard Chang

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