Looks like the White House’s offshore drilling moratorium has finally killed off its first major company.
USA Today has an AP report to the effect that Seahawk Drilling, based in Houston, is filing for Chapter 11 bankruptcy and selling off its assets to competitor Hercules Offshore. The deal comes to $105 million based on Hercules’ current stock value.
Seahawk, which announced the deal with Hercules Offshore Inc. Friday, has been hurt by a slowdown inGulf of Mexico drilling after the BP oil spill last April. The government halted drilling in deep waters and imposed tough new rules that have curtained all energy exploration in U.S. waters.
Seahawk owns a fleet of 20 jackup rigs for shallow water exploration, while Hercules owns 30 rigs, vessels and other equipment. It also provides drilling services. The deal creates a larger company with a more diverse fleet and greater operational flexibility, Seahawk said.
The company, which neither drills in deep water nor has been cited for any major safety or environmental violations, announced in November that it lost $32 million as a result of the administration’s refusal to issue drilling permits. At the time, Seahawk CEO Randy Stilley pinned the losses directly on the moratorium…
“Due to dramatic delays in the issuing of shallow water drilling permits in the U.S. Gulf of Mexico resulting from the Macondo well blowout, as well as the continued low prices for natural gas and the economic slowdown, Seahawk’s liquidity and operations have been adversely affected. As previously announced, we have engaged Simmons & Company International to explore strategic alternatives for the company in order to examine all possible options to best realize the potential of our assets and maximize value to our shareholders.”
The AP story on the Hercules merger indicates hundreds of layoffs might be coming.
If the bankruptcy plan is approved by the court and regulators, Seahawk will cease operations as an independent company. It’s unclear what will happen to the company’s 494 employees, spokesman Thomas Becker said. Of Seahawk’s 20 drilling rigs, seven are now deployed on projects, he said.
Seahawk said it has obtained a $35 million credit facility to help fund operations until the deal closes.
Stilley noted in the company’s press release on the merger that Seahawk was vanishing purely due to government-imposed conditions – and doubted his firm would be the only casualty…
“While we are pleased with the successful outcome of our strategic review, and believe this is a positive result for both companies and our stakeholders, I think it is important to note that Seahawk was forced to seek strategic alternatives only after an unprecedented decline in the issuance of offshore drilling permits following the Macondo blowout. The decision by regulators to arbitrarily construct unnecessary barriers to obtaining permits they had traditionally authorized has had an adverse impact not only on Seahawk, but on the sector as a whole,” Stilley said.