Offshore drilling contractor Noble Corp., which had been struggling with reduced demand amid plunging oil prices, has filed for bankruptcy with a plan to slash its $4 billion debt burden.
The Chapter 11 filing on Friday came two weeks after Noble missed a $15 million interest payment and said it was in talks with its creditors about a restructuring deal.
“Noble enters chapter 11 with the strong support of its creditors, having executed a restructuring support agreement” that “provides for a massive deleveraging of Noble’s capital structure without impairing trade creditors,” CFO Richard Barker said in a court declaration.
The plan would reduce Noble’s debt load — all of which is unsecured — to less than $450 million, with $3 billion in debt being converted to equity.
“The fundamental problem that Noble faces is that its entirely unsecured capital structure was built for a very different offshore market environment, where activity levels and drilling dayrates were high enough to support the significant capital that had been deployed to expand and upgrade its fleet in response to the market demand in this structurally different market,” Barker said.
“Today, Noble is simply unable to generate sufficient earnings to support its current capital structure,” he added.
Noble currently operates a fleet of 24 rigs around the world, serving customers including Royal Dutch Shell, ExxonMobil, Equinor ASA, and Saudi Arabian Oil Co.
In 2019, it lost $734.9 million on revenue of $1.31 billion, reflecting a significant fall in demand for oil rigs as producers cut capital spending combined with an oversupply of rigs. Its shates had plunged 84% for the year through Thursday’s closing.
“For Noble, the development of COVID-19 into a global pandemic erased any doubt as to whether Noble would be able to avoid bankruptcy,” Barker said, noting demand for oil has declined significantly due to social distancing, reduced travel, and remote work policies.
Noble is the second major offshore driller to file for bankruptcy this year, following Diamond Offshore Drilling in April. Another driller, Valaris, warned last week that Chapter 11 bankruptcy was “imminent.”