SeaDrill Limited’s shares increased 15.12% to eventually close at 23.6 cents on Apr 9, reflecting investors’ optimism after the company received virtually unanimous backing for its reorganization plan.
The company’s financial restructuring plan received approval from 99.8% of the creditors. Per the restructuring agreement, the international offshore drilling company will witness capital injection of $1.08 billion that would comprise $880 million of secured loans and $200 million equity.
SeaDrill’s restructuring plan will now have to be approved on a confirmation hearing scheduled to commence on Apr 17, 2018. Following the approval of the plan, existing shareholders will receive 1.9% stake in the post-restructuring equity.
Being one of the worst sufferers of the downturn and burdened with massive debt, the company had filed for Chapter 11 bankruptcy protection on Sep 12 to restructure its balance sheet amid volatile oil prices. SeaDrill’s Chapter 11 filing was just another disruption in the offshore drilling industry. Many offshore drilling companies like Ocean Rig UDW LLC., Paragon Offshore, Hercules Offshore, Inc. and Vantage Drilling Company had also filed for bankruptcy protection amid declining oil prices.
Notably, the company has been facing pressure in its top line owing to idle rigs and lower day rates. SeaDrill’s earnings have also been declining over the last five quarters on higher costs and lower revenues. However, the restructuring agreement is likely to improve the liquidity position of the company and will provide growth opportunities. SeaDrill, which has one of the youngest and most advanced drilling fleets will be poised to secure more contracts post the restructuring, helping the company to stabilize revenues.
Zacks Rank and Key Picks
SeaDrill carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked players in the energy space include Northern Oil and Gas, Inc. (NOG - Free Report) , Continental Resources, Inc. (CLR - Free Report) and Flotek Industries, Inc. (FTK - Free Report) .
Northern Oil and Gas delivered an average positive earnings surprise of 175% in the trailing four quarters.
Continental Resources delivered an average positive earnings surprise of 64.93% in the trailing four quarters.
Flotek Industries’ earnings are anticipated to witness a year-over-year increase of 557.14% in 2018.
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