Contract driller Diamond Offshore has filed for bankruptcy with debts of $2.6 billion, as the energy industry is hammered by crashing oil prices.
Court documents seen Monday show Houston-based Diamond Offshore Drilling Inc. filed the petition in Houston on Sunday, citing the downturn that accelerated with a recent oil price war between Russia and other major producers.
The global economic crisis caused by the coronavirus pandemic has devastated the oil industry in the U.S., which pumps more crude than any other country. Both offshore and onshore oil companies have been laying off hundreds of people.
Diamond had $5.8 billion of assets and $2.6 billion of debt as of the end of 2019, it said in its Chapter 11 petition. It has about $435 million of cash on hand, according to the document.
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The company’s specialty of relatively costly, ultra-deep drilling has put it at a competitive disadvantage with the plunge in oil prices.
Diamond Offshore reported a net loss of $62.7 million in the last quarter of 2019, even before the May future for the U.S. benchmark plunged below zero this month. Its failure to make a bond interest payment earlier this month on $500 million in debt due in 2039 raised expectations it might seek a restructuring. The company also announced it had hired advisors to discuss how to handle its predicament.
“Diamond’s decision to not make an interest payment shows that the coronavirus induced crash in oil prices and corresponding capital spending cuts by oil and gas producers has indefinitely deferred any potential recovery in offshore drilling activity and dayrates,” Pete Speer, Moody’s senior vice president, said in issuing a downgrade for the company.