Drilling rigs and ships anchored in Skipavika, Norway. Picture: REUTERS/GWLADYS FOUCHE
Drilling rigs and ships anchored in Skipavika, Norway. Picture: REUTERS/GWLADYS FOUCHE

Oslo — Seadrill announced a writedown of $1.2bn on the value of its oil drilling rigs on Tuesday and warned that its survival hinges on converting parts of its $7.4bn in debt into equity, sending its shares tumbling.

The company plans to cut 1,400 jobs and lower costs by $130m over the next 18 months, CFO Stuart Jackson told a conference call.

“Until such time that an agreement is reached to restructure our borrowing commitments, substantial doubt remains over [the] ability to continue as a going concern,” Seadrill said in its first-quarter earnings report on Tuesday.

Seadrill’s Oslo-listed shares traded 15% lower at 2.27pm GMT and are down more than 80% for the year to date.

Controlled by Norwegian-born shipping tycoon John Fredriksen, the company struggled even before the Covid-19 pandemic as low oil prices curbed demand for rigs.

Seadrill is hiring bankers and lawyers to overhaul its finances later this year, although it did not name the advisers.

“This industry has two fundamental challenges, which are emphasised by recent events — there are too many rigs carrying too much debt,” CEO Anton Dibowitz said. “We recognise, along with others in the sector, that a number of our assets are increasingly unlikely to return to the market and need to be scrapped.”

Seadrill’s impairment charge assumed that up to 10 of its 35 drilling rigs may be scrapped and the company hopes 50 floating rigs will eventually be removed from the global market, Dibowitz said.

Following the impairment, the company reported a net loss of $1.57bn for the first quarter compared to a loss of $295m a year earlier.

On Monday, the company announced its intention to de-list from the New York Stock Exchange this month while maintaining an Oslo listing.