BY Steven Church, Tiffany Kary and David Wethe
(Bloomberg) — Hercules Offshore Inc., owner of the largest fleet of shallow-water drilling rigs in the Gulf of Mexico, filed for bankruptcy with a plan to be taken over by senior creditors.
The company said it planned to use the bankruptcy process to implement a proposal, announced in July, to cut $1.2 billion in debt. The plan calls for investors to trade their senior notes for almost 97 percent of Hercules’s equity.
Some noteholders would also lend the company $450 million to help finish building a new oil-drilling rig, the company said in a statement.
Under the plan, current shareholders would have a chance to split the 3 percent of the company not going to noteholders, Hercules said. The plan must be approved by a bankruptcy judge in Wilmington, Delaware, where the case was filed Thursday.
Hercules, which leases rigs to oil and gas producers, said the plan has the “overwhelming” support of the noteholders.
The Houston-based company, formed in 2004 as a small gulf driller, has a fleet of 27 jack-up rigs and 21 lift boats.
Demand for both U.S. and international business has flagged as the price of oil has plunged. 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.
Debt issues by Hercules and fellow Houston-based drilling rig provider Paragon Offshore were among the worst-performing oil and gas service bonds in the high-yield energy index in the first quarter of 2015, according to Bloomberg Intelligence analysts Spencer Cutter and Yuanliang Huang.
The number of rigs operating in the U.S. Gulf of Mexico has fallen by more than half from last year’s high of 63 in August, according to Baker Hughes Inc.
Hercules listed liabilities of $1.3 billion and $546 million in assets as of Aug. 11.
The case is In re Hercules Offshore Inc., 15-11685, U.S. Bankruptcy Court, District of Delaware (Wilmington).
©2015 Bloomberg News