Houston based offshore drilling company Hercules Offshore, has today started along a path that will inevitably lead it towards filing for bankruptcy.
Hercules Offshore, a company that specialises in offshore shallow water drilling, has been struggling with the huge decrease in rig day rates that have come hand in hand with the industry crippling oil price. The company now faces a massive debt of US$ 1.2 billion.
In a bid to save itself from extinction, Hercules has agreed to hand ownership to its creditors, a deal that will see it file for Chapter 11 bankruptcy protection towards early July.
In return, the company’s creditors have agreed to write off the majority of Hercules’ debt by converting it into new equity.
The plan has so far been agreed by two-thirds of Hercules creditors, but still has to approved by the courts.
A spokesman of the Hercules Offshore said “The company said it will continue operations as usual, pay vendors and meet contract obligations.”
Hercules stated in February that its contracts for drilling rigs with the world’s largest oil producer, Saudi Aramco, were terminated only to be renegotiated then reinstated at a much lower rate in June.
The news makes this the second bankruptcy to hit Houston based offshore oil and gas contractors in three months, with offshore diving contractors Cal Dive International filling in March.
With UK based oil tycoon Sir Ian Wood of multinational Wood Group, predicting this week that the price of a barrel could stay around US$65 for the next two to three years, there could be some further pain felt within the offshore energy industry for some time to come.
Last updated on 11:00AM - 25/06/15