Pacific Drilling S.A. today announced that, with the aim to optimize its capital structure pending recovery in the floating rig drilling industry, it and certain of its domestic and international subsidiaries have filed petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. The Company intends to use the Chapter 11 process to pursue a comprehensive restructuring of the Company’s approximately $3.0 billion in principal amount of outstanding funded debt.
With approximately $350 million of cash and cash equivalents as of September 30, 2017 and seven of the most advanced high-specification drillships in the world, the Company intends to continue its world-wide operations as usual and to perform and pay all obligations incurred during its Chapter 11 case in full, subject to court approval.
Voluntary Reorganization under Chapter 11
After reviewing the alternatives for addressing its balance sheet long-term under U.S. and non-U.S. laws, the Company decided that Chapter 11 was the best available forum for its restructuring. The Company intends that Chapter 11 will provide it a respite from creditor claims in order to explore alternatives to reorganize in a manner that maximizes the enterprise value of the Company and is fair to all stakeholders.
“We enter Chapter 11 with a strong cash position and the dedicated team necessary to continue to deliver the highest quality service to our customers in the safest and most efficient manner,” Chief Executive Officer, Paul Reese, said. “Throughout the Chapter 11 process, we anticipate using our strong cash position to meet all ongoing obligations to our employees, customers, vendors, suppliers and others.”
The Company has taken this step after discussions with key constituencies, including substantial holders of its indebtedness and intends to work towards a consensual restructuring of its balance sheet in the best interests of its stakeholders. “We look forward to continuing discussions with our stakeholders during the Chapter 11 proceedings and thank all those involved for their efforts so far,” continued Reese.
Additional information about the Chapter 11 proceedings can be found (i) in the Form 6-K containing our quarterly report for the period ended September 30, 2017 that we expect to furnish to the SEC tomorrow, (ii) on the Company’s website at www.pacificdrilling.com/restructuring or (iii) via the Company’s restructuring information line at: +1 866-396-3566 (Toll Free) or +1 646-795-6175 (International Number).
The Company intends to continue to file quarterly and annual reports with the Securities and Exchange Commission, which will also be available on its website.
Third-Quarter 2017 Operational and Financial Commentary
The Company also announced a net loss for third-quarter 2017 of $157.5 million or $7.38 per diluted share, compared to a net loss of $138.1 million or $6.48 per diluted share for second-quarter 2017, and net income of $0.2 million or $0.01 per diluted share for third-quarter 2016.
Contract drilling revenue for third-quarter 2017 was $82.1 million, which included $5.5 million of deferred revenue amortization, compared to second-quarter 2017 contract drilling revenue of $67.1 million, which included $5.1 million of deferred revenue amortization. The increase in revenues resulted primarily from the Pacific Scirocco starting its contract with Hyperdynamics mid second-quarter 2017 compared to operating the majority of third-quarter 2017. During third-quarter 2017, our operating fleet achieved a record average revenue efficiency(a) of 99.9%.
Operating expenses for third-quarter 2017 were $58.9 million as compared to $65.0 million for second-quarter 2017. Operating expenses for third-quarter 2017 included $2.7 million in amortization of deferred costs, $0.9 million in reimbursable expenses and $6.8 million in shore-based and other support costs.
General and administrative expenses for third-quarter 2017 were $22.1 million, compared to $20.1 million for second-quarter 2017. Excluding certain legal and financial advisory fees of $6.8 million in third-quarter 2017 and $6.4 million in second-quarter 2017, our corporate overhead expenses(b) for third-quarter 2017 were $15.3 million, compared to $13.7 million for second-quarter 2017. The increase in corporate overhead expenses was primarily related to severance related costs.
Adjusted EBITDA(c) for third-quarter 2017 was $1.9 million, compared to Adjusted EBITDA of $(17.6) million in second-quarter 2017. The increase in Adjusted EBITDA was primarily the result of increased revenues during third-quarter 2017.
Net loss for third-quarter 2017 included a write-off of $30.8 million of deferred financing costs, and an other-than-temporary impairment in our available-for-sale securities of $6.1 million, recorded in other expense.
For third-quarter 2017, cash flow from operations was $(33.1) million. Cash balances, including $8.5 million in restricted cash, totaled $358.3 million as of September 30, 2017, and total outstanding debt was $3.0 billion.
The Company will not be holding an earnings conference call this quarter.