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Diamond Offshore Drilling has filed for Chapter 11 bankruptcy protection, becoming the second major victim of the oil market crash so far, after Whiting Petroleum filed earlier this month.
With a debt pile of $2.6 billion, according to the Financial Times, Diamond Drilling said the move was motivated by the unprecedented oil price crash, saying in its filing that conditions in the oil industry had "worsened precipitously in recent months."
According to Bloomberg, at least seven oil companies in North America have gone under since the start of the year, all before WTI and other benchmarks turned negative for a day last week. This has motivated creditors to pout their demands for repayment from troubled oil players on hold to avoid ending up with assets worth pretty much nothing amid the oil demand devastation that the coronavirus pandemic wreaked on the world.
Diamond Drilling said it had tried borrowing more to stave off disaster as well as taking other steps to avoid bankruptcy but had failed. Bloomberg notes that Diamond Drilling is at a disadvantage to other drillers because it focuses on offshore drilling. Offshore drilling is a lot more expensive than onshore drilling, making the pain a lot deeper for companies focused on the former.
More bankruptcies are on the way, according to forecasters. Earlier this month, Rystad Energy warned that as many as 533 U.S. oil companies go bankrupt if oil stays at around $20 a barrel.
"$30 is already quite bad, but once you get to $20 or even $10, it's a complete nightmare," said Rystad's head of shale research, Artem Abramov. He added, "At $10, almost every US E&P company that has debt will have to file Chapter 11 or consider strategic opportunities."
The Motley Fool surveyed energy experts about which companies are the most likely to be next to file for bankruptcy, and Diamond Drilling was among them when the findings were published last Friday. The other three companies most at risk are Chesapeake Energy, Occidental Petroleum, and Callon Petroleum.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.