Seadrill Ltd (NYSE:SDRL) stock was hit hard on Tuesday following a bankruptcy warning from the company.
The bankruptcy warning came from Seadrill LTD as it reported earnings for the fourth quarter of 2016. According to statements in this earnings report, the company is hoping to obtain more money from lenders to move forward with restructuring plans.
Seadrill Ltd notes that negotiations are currently taking place for additional funding. However, it says that it will likely have trouble securing more funds before April 30. This is the cutoff date for the West Eminence facility. It also serves as a milestone bank facility amendments from April 2016.
“Although an extension of these and other dates is possible with the requisite lender consents, we may be unable to obtain an extension on terms acceptable to the Company,” Seadrill Ltd said in a statement. “In the event a consensual restructuring agreement is not concluded or an agreement to an extension is not reached, we are also preparing various contingency plans, including potential schemes of arrangement or chapter 11 proceedings.”
Despite the bankruptcy warning, Seadrill Ltd did turn in positive results for the fourth quarter of the year. The drilling company reported earnings per share of 26 cents on revenue of $667.00 million. This beat out Wall Street’s estimates, which had SDRL reporting earnings per share of 18 cents on revenue of $649.32 million.
Seadrill Ltd notes that some of its units will be coming off contract during the first quarter of 2017. It expects this to drive EBITDA down to $250 million. The company is also looking for operating income for the quarter to be $50 million.
SDRL stock was down 15% as of Tuesday morning and is down 49% year-to-date.