DIAMOND Offshore has filed for bankruptcy with debts of $2.6 billion, as the plunge in oil prices and the downturn in business activity because of the coronavirus pandemic have sapped demand for its offshore drilling services.
The rig contractor controlled by Loews Corp, listed $5.8 billion of assets and $2.6 billion of debt in a Chapter 11 petition filed in Houston, citing year-end 2019 data. It has about $434.9 million of cash on hand, according to the document.
Diamond, which has an office in Dyce, owns rigs that can drill in water more than two miles deep. But offshore oil is among the most expensive to produce, putting the company at a disadvantage when prices plunged to less than $30 a barrel.
While newer deepwater projects are less expensive, they still take longer to develop than shale wells and they still can’t compete on costs. What’s more, a global glut of offshore vessels has squeezed profit margins.
Conditions worsened “precipitously in recent months,” the company said, citing a price war between OPEC and Russia and the Covid-19 pandemic.
With cash running short, the Houston-based company led by chief executive officer Marc Edwards skipped a semiannual interest payment due April 15 on some of its senior notes.
Diamond Offshore adds to the more than 200 oilpatch bankruptcies dating from 2015, according to a tally by the Haynes & Boone law firm. About 2,500 jobs could be at stake at Diamond.
The case is Diamond Offshore Drilling Inc., 20-32307, U.S. Bankruptcy Court for the Southern District of Texas (Houston).
