Pacific Drilling Set to Exit Bankruptcy Without Bond Debt

Pacific Drilling announced Tuesday that a federal bankruptcy court in Texas has confirmed its prepackaged Chapter 11 bankruptcy, paving the way for the financially-troubled company to move ahead without any bond debt on its ledgers.

“The court's confirmation of our plan represents an important milestone in our progress towards emergence by year-end with a fully de-levered balance sheet and the capacity to deliver world class drilling services with our fleet of sixth and seventh generation drillships,” said Bernie G. Wolford, CEO of Pacific Drilling. 

The plan allows Pacific Drilling to eliminate more than a billion dollars in debt obligations. It also gets access to operating funding after its exit from bankruptcy, including about $100 million in cash on hand and another $80 million in a term loan exit facility. 

Pacific first filed for bankruptcy protection in late 2017. With the long-running offshore oil and gas downturn taking its toll on drilling contractors, the company was losing significant sums of money - about $400 million over the first nine months of 2017 alone. The agreement allowed it to restructure about $3 billion in debt and continue its operations. 

The firm filed for bankruptcy again in November 2020, citing the impact of the COVID-19 downturn and seeking to eliminate about $1.1 billion in bond debt. The new deal is a voluntary restructuring agreement with its largest creditors, and with the court's confirmation, it is nearing finalization. 

Pacific Drilling is among the latest in a parade of offshore oil and gas companies to shed excess debt through the Chapter 11 process this year. A voluntary Chapter 11 bankruptcy filing in the U.S. federal court system typically allows companies to preserve their operations and move forward with much-reduced interest and repayment obligations on their balance sheets. Competitors Diamond Offshore, Noble Drilling, Valaris and (some subsidiaries of) Seadrill have all filed for bankruptcy through the U.S. courts over the course of 2020.