The No. 1 offshore rig operator in the world, Valaris plc, is seeking Chapter 11 protection in Houston, beset by the devastating impacts of Covid-19.

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The London-based operator, whose corporate office is in Houston, is seeking to wipe out an estimated $7 billion in debt. The voluntary bankruptcy filing was made in the U.S. Bankruptcy Court for the Southern District of Texas. 

“The substantial downturn in the energy sector, exacerbated by the Covid-19 pandemic, requires that we take this step to create a stronger company able to adapt to the prolonged contraction in the industry, and to continue to enhance our position as overall market conditions improve,” said CEO Tom Burke.

“We have taken several steps to right-size and streamline our organization in line with our goal to be the offshore drilling cost leader. Now, we intend to use this restructuring to complement these measures to create a stronger financial structure for the company.”

Valaris was formed two years ago in the all-stock merger between Ensco plc and Rowan Cos. plc. The company, which employs nearly 4,000 people worldwide, has extensive reach into ultra-deepwater basins including in the Gulf of Mexico, West Africa and Southeast Asia.

With nearly $13 billion in assets, the Valaris fleet consists of 16 drillships, 12 semisubmersibles, 54 jackups and two deepwater managed units.

“Valaris will continue to serve our customers uninterrupted through this process, delivering safe and reliable operations, through its highly capable rig fleet,” Burke said. 

The company has secured a restructuring support agreement and backstop commitment agreement with about half of its noteholders. The financial restructuring is intended to reduce the debt load and “support continued operations during the current lower demand environment,” while providing a “robust financial platform to take advantage of market recovery over the long term.”

Management said it “remains confident” that the company can maintain liquidity and operate in the ordinary course of business. Valaris has around $175 million in cash and an additional $500 million in committed debtor-in-possession financing from some noteholders to support operations through the process.

The Valaris restructuring follows dozens of Chapter 11 filings across the energy sector since the pandemic began to crush oil and gas demand and thus, activity. Offshore oilfield services giants Noble Corp. and Diamond Offshore Drilling Inc. also are restructuring.