Seadrill is examining the possibility of a second US Chapter 11 restructuring in two years to tackle its huge $7.4bn debt pile.
The John Fredriksen-backed drillship and rig owner has been hit by the severe downturn in oil markets caused by a price plunge, as well as coronavirus restrictions and the subsequent demand hit.
A Seadrill spokesman told the Wall Street Journal: "We are considering all options at this stage, of which Chapter 11 is one."
He added the situation was still fluid and the timing uncertain.
But he said: "We anticipate this to take place over the coming year, but it is too early to say for certain."
In 2018, Seadrill emerged from its previous Chapter 11 restructuring. Fredriksen stepped down as chairman in November last year. He has a 27% stake.
Workers facing the chop
Speaking on a conference call with analysts, chief executive officer Anton Dibowitz said the company had $1.2bn of cash on hand.
Chief financial officer Stuart Jackson said the company is focused on cash preservation.
"We have taken a number of actions, which will lead to $130m of cost reductions over the coming 18 months," he said.
"As a result of reduced activity levels there will also be a reduction in our total onshore and offshore headcount...from 4,500 to 3,100."
The company has reassessed the value of its assets and took a $1.2bn impairment in the first quarter.
"We've looked at the expected duration of assets being cold stacked, which we now expect to be longer, the reactivation costs associated with those assets, which we now expect to be higher because of longer durations in cold stacking, and the return that can be achieved from their reactivation investment, which we now expect to be lower because of cost increases and the lower oil price expectations," Jackson added.
Scrapping on the cards
This has all added up to an increased likelihood of scrapping, particularly of semi-submersible units.
"There are up to 10 rigs which may be scrapped," Jackson said.
"And over the coming months, we will be looking to prioritise these activities."
The company said this week it is pulling its New York listing and shifting its main board Oslo listing to the over the counter market to save money.
Seadrill logged a net loss of $1.56bn in the first quarter, up from $296m in 2019.
The company has been working with creditors on an interim financing package since the end of 2019, with a view to buying time for a longer-term deal.
Seadrill has gained substantial support, it said, but needs 100% agreement from 43 institutions for some of the amendments proposed.
"Recent market uncertainties have prevented a coalescing of views," the company added. "As a consequence, Seadrill has decided not to proceed with the bank consent and has retained financial and legal advisors to prepare for a comprehensive restructuring of the balance sheet."
Fredriksen's shipowning company SFL Corp revealed last month it is in talks over reducing bareboat charter rates for three of its drillships operated by Seadrill. These have a charter backlog of $900m.
