Rig company Seadrill, once the crown jewel in the business empire of shipping tycoon John Fredriksen, will present a refinancing plan in the first half of this year to address its $10 billion debt, the company said last week.
At the height of the oil price boom, the company was the world’s largest offshore driller by market capitalisation but it is now struggling as oil companies implement drastic cost cuts to counter the 70 percent decline in crude prices since mid-2014.
Seadrill’s share price has fallen by 93 percent over the past two years, against a one percent decline for the Oslo benchmark index over the same period, but it jumped by 10 percent on Thursday’s announcement.
Key to the refinancing plan will be the response of Seadrill’s biggest shareholder, Fredriksen’s Hemen Holding, which owns a little more than 24 percent of the company. Fredriksen has previously put up his own cash when other companies in his group have encountered financial problems.
“It is positive for the company that a financing plan will be announced in H1 (2016), but the dilutive risk to the shares is huge in a credit event,” Carnegie analyst Johan Stroem said.
“The company continues to cut costs, which is very positive, and they are in dialogue to delay delivery of new-build jackups (self-elevating rigs) in China,” he said, adding that he did not expect to change his sell rating on the stock.
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