Gulf Rig Supplier May Be First to Exit Oil-Slump Bankruptcyby
Hercules Offshore wins court approval to reorganize business
Company negotiated deal with lenders before filing Chapter 11
Hercules Offshore Inc. may become the first big energy-sector business to exit bankruptcy since the crude slump triggered insolvencies among oil and gas drillers and the companies that serve them.
Hercules, the owner of the largest fleet of shallow-water drilling rigs in the Gulf of Mexico, won court approval of its reorganization plan Thursday, less than two months after it filed Chapter 11 to implement a deal with creditors.
The Houston-based company should complete all the paperwork necessary to officially exit bankruptcy by the end of October, Emanuel Grillo, an attorney for Hercules, said in an interview.
“Hercules has the benefit of being one of the first in and, hopefully, the first out,” Grillo, a partner at Baker Botts LLP, said Thursday in bankruptcy court in Wilmington, Delaware.
Hercules, formed in 2004 as a small gulf driller, has a fleet of 27 jack-up rigs and 19 lift boats, according to its website. With oil prices down by more than half since June 2014, demand for both U.S. and international business has flagged, making it harder for oilfield servicers to meet debt obligations.
Drillers around the world have also been suffering from a glut of new sophisticated vessels displacing older rigs in the market. Cal Dive International Inc., a contractor that does manned diving and platform installation, sought creditor protection in March.
Since October, at least six oil and gas companies -- including explorers and servicers -- have filed for bankruptcy listing debt greater than $500 million, according to data compiled by Bloomberg. None has made it out yet.
Under the pre-bankruptcy deal, Hercules will be taken over by its senior noteholders in exchange for slashing the $1.2 billion they are owed. Some of the noteholders will lend the company $450 million to help finish building a new drilling rig, the company said in a statement.
Hercules was able to get through quickly by spending nine months negotiating with creditors before it filed, Grillo said. By the time it sought bankruptcy protection on Aug. 13, it had won substantial noteholder support for its reorganization plan. Investors holding 99 percent of the notes voted for the proposal, Grillo said in court.
“The company started early in the process, even before there was a default,” he told U.S. Bankruptcy Judge Kevin Carey.
The case is In re Hercules Offshore Inc., 15-11685, U.S. Bankruptcy Court, District of Delaware (Wilmington).