Houston-based oilfield services provider Weatherford will file for a Chapter 11 bankruptcy protection as part of an agreement with a group of its senior noteholders.
he company on Friday said it had reached a restructuring support agreement with noteholders holding 62% of the Company’s senior unsecured notes. Weatherford said the restructuring support agreement would lead to a “comprehensive deleveraging of the Company’s balance sheet and an approximately $5.8 billion reduction of the Company’s funded debt.”
The proposed plan entails the company’s unsecured noteholders exchanging approximately $7.4 billion of senior unsecured notes for approximately 99% of the equity in the Company and $1.25 billion of new tranche B senior unsecured notes.
“The proposed comprehensive financial restructuring would significantly reduce the Company’s long-term debt and related interest costs, provide access to additional financing and establish a more sustainable capital structure,” Weatherford said.
“Weatherford expects to implement the Restructuring Agreement through a “pre-packaged” Chapter 11 process and expects to file U.S. chapter 11 and Irish examinership proceedings[…]. As part of this process, Weatherford intends to continue engaging in discussions with and begin soliciting votes from, its creditors in connection with a proposed Plan of Reorganization prior to filing,” the company added.”
The restructuring agreement contemplates Weatherford will continue operating its businesses and facilities without disruption to its customers, vendors, partners or employees and that all trade claims against the Company (whether arising prior to or after the start of the Chapter 11 Cases) will be paid in full in the ordinary course of business.
Mark A. McCollum, President and CEO of Weatherford said: “During the past year, we have been executing a company-wide transformation to fundamentally improve the way we operate our business and to strengthen Weatherford for the long run. Despite the challenging market dynamics our industry continues to face, we believe that our transformation strategy, which is designed to improve our execution capabilities, lower our cost structure and create efficiency to allow us to better price our products and services, will position Weatherford for long-term success.
“However, we still face a high level of debt that affects our ability to make investments in our company and implement further elements of our transformation plan. We are pleased that our noteholders recognize the long-term value Weatherford can create with an improved balance sheet as we work to achieve the full potential of our business transformation. We expect that the new capital structure will allow us to continue to capitalize on our momentum and build a truly integrated service company with sustainable profitability and long-term growth potential.”
McCollum said: “We are taking these actions to ensure we can do an even better job of meeting our commitments to all of our key stakeholders by creating the strongest Weatherford possible. We do not anticipate any operational disruptions as a result of this announcement. Our customers, partners, employees and vendors should not experience any changes in the way we do business, and we expect their experience will improve after restructuring is complete.
“We expect a restructuring will provide us with improved liquidity and greater financial stability and flexibility to make investments to enhance our platform while we continue to invest in the resources necessary for our business to grow.”
Weatherford, which provides equipment and services to the oil and gas exploration and production industry, both onshore and offshore, recorded a net loss of $481 million in the first quarter of the year, compared to $245 million in the first quarter of 2018.
The company reported revenues revenues of $1.3 billion in the first quarter of 2019, a decrease of $77 million, or 5%, compared to the first quarter of 2018.
Weatherford blamed revenue decline on lower activity levels in Canada and the United States, as well as decreased revenues associated with the divested land drilling rigs in the Middle East and North Africa, partially offset by higher revenues from integrated service projects and product sales in Latin America and higher Completions activity in the Eastern Hemisphere.