Two John Fredriksen-backed companies are in talks over a reduction in drillship bareboat charters as day rates crash.
Fredriksen-controlled shipowner SFL Corp revealed in a share registration prospectus that it was contacted by the Oslo-listed drilling company on 3 April to start discussions about the leases.
The Oslo-headquartered ship lessor has three drilling unit chartered to Seadrill, where Fredriksen is a 27% shareholder.
The deals had a backlog of $900m as of 31 December.
Talks are ongoing over certain terms in the contracts, including charter rates, New York-listed SFL said.
"A significant portion of our net income and operating cash flows are generated from our leases with subsidiaries of Seadrill," SFL added.
"A significant reduction in the charter rates payable to us under these leases, or other material modification of these leases, could have material adverse effect on our business, financial condition, results of operations and cash flows, our ability to pay dividends to our shareholders and compliance with covenants in our credit facilities."
Over-supply hitting rates
The shipowner had earlier said an over-supply of drilling units has led to a reduction in day-rates and "therefore has adversely affected the ability of certain of our rig charterers to make lease payments."
Seadrill emerged from Chapter 11 restructuring in July 2018.
Fredriksen stepped down as its chairman last November, with the company saying it was entering into more talks to restructure debt.
During the Seadrill Chapter 11 saga, SFL agreed to cut charter rates by 30% for a five-year period starting in 2018, with the reduced amounts to be added back in after that.
And SFL agreed charter reductions when Fredriksen's Frontline restructured in 2011.
Shelf stacked
SFL registered a potential share sale worth $100m with the US Securities and Exchange Commission (SEC) on Wednesday.
The company said it has a strong balance sheet with more than $200m in available liquidity at the end of the first quarter.
The registration is effective for three years.
Any cash from sales will be used for general corporate purposes, including the pursuit of other business combinations, the acquisition of vessels or related businesses, the expansion of operations, repayment of existing debt and share repurchases.
SFL is constantly evaluating opportunities, the company said.
In February, SFL took a $34.1m impairment hit from terminating three bareboat deals for offshore ships with Solstad Offshore, in which Fredriksen also has a stake.
SFL's net profit in the fourth quarter was $23.6m, compared with $3.82m in the third.
Revenue from its mixed fleet rose to $120m from $112m.
