Vantage Drilling International, a Cayman Islands exempted company, is an international
offshore drilling company focused on operating a fleet of modern, high specification
drilling units. Our principal business is to contract drilling units, related
equipment and work crews, primarily on a dayrate basis to drill oil and natural
gas wells for our customers. Through our fleet of drilling units, we are a provider
of offshore contract drilling services to major, national and independent oil
and natural gas companies, focused on international markets. Additionally, for
drilling units owned by others, we provide construction supervision services
while under construction, preservation management services when stacked and
operations and marketing services for operating rigs.
Our strategy includes:
Maintain a strong balance sheet and significant liquidity. In response to the
significant downturn in the drilling industry, we are strategically preserving
our liquidity. Completing the Reorganization Plan significantly reduced our
debt service obligations and we have no significant maturities until December
2019. We are working to optimize our workforce for our current level of operations,
closely monitoring maintenance and capital expenditures and working to extend
our contract backlog.
Capitalize on customer demand for modern, high specification units. We own
and manage high specification drilling units, which are well suited to meet
the requirements of customers for efficiently drilling through deep and complex
geological formations, and drilling horizontally. Additionally, high specification
drilling units generally provide faster drilling and moving times. A majority
of the bid invitations for jackups that we receive require high specification
units. Aside from their drilling capabilities, we believe that customers generally
prefer modern drilling units because of improved safety features and less frequent
downtime for maintenance. Modern drilling units are also generally preferred
by crews, which makes it easier to hire and retain high quality operating personnel.
Expand key industry relationships. We are focused on expanding relationships
with major, national and independent oil and natural gas companies, focused
on international markets, which we believe will allow us to obtain longer-term
contracts to build our backlog of business when dayrates and operating margins
justify entering into such contracts. We believe that our existing relationships
with these companies have contributed to our historically strong contract backlog.
Longer-term contracts increase revenue visibility and mitigate some of the volatility
in cash flows caused by cyclical market downturns.
Maintain a balance of deepwater and jackup exposure. We believe our customers
will continue an emphasis on exploration in both deep and shallow waters due,
in part, to technological developments that have made such exploration more
feasible and cost-effective. We believe that the water-depth capability of our
ultra-deepwater drilling units is attractive to our customers and allows us
to compete effectively in obtaining long-term deepwater drilling contracts.
We believe our modern fleet of high specification jackups when operated efficiently
also allows us to bid effectively in obtaining contracts.
We may seek to manage additional deepwater drilling units and jackup drilling
units to service the market.
The offshore contract drilling industry provides drilling, workover and well
construction services to oil and natural gas exploration and production companies
through the use of mobile offshore drilling units. Historically, the offshore
drilling industry has been very cyclical with periods of high demand, limited
rig supply and high dayrates alternating with periods of low demand, excess
rig supply and low dayrates. Periods of low demand and excess rig supply intensify
the competition in the industry and often result in some rigs becoming idle
for long periods of time as is the case today. As is common throughout the oilfield
services industry, offshore drilling is largely driven by actual or anticipated
changes in oil and natural gas prices and capital spending by companies exploring
for and producing oil and natural gas. Sustained high commodity prices historically
have led to increases in expenditures for offshore drilling activities and,
as a result, greater demand for our services. As a result of the persistence
of reduced oil and gas prices since late 2014, reduced demand for offshore drilling
rigs by our customers has continued. The reduced demand is occurring at the
same time that drilling rigs continue to be brought into the market or scheduled
for delivery resulting in an oversupply of equipment. We expect that these adverse
market conditions are likely to continue for the duration of 2018 and potentially
beyond.
Offshore drilling rigs are generally marketed on a worldwide basis as rigs
can be moved from one region to another. The cost of moving a rig and the availability
of rig-moving vessels may cause the supply and demand balance to vary between
regions. However, significant variations between regions do not tend to exist
long-term because of rig mobility.
The offshore drilling market generally consists of shallow water (<400 ft.),
midwater (>400 ft.), deepwater (>4,000 ft.) and ultra-deepwater (>7,500
ft.). The global shallow water market is serviced primarily by jackups
On December 3, 2015 (the “Petition Date”), the Company, certain
of its subsidiaries and certain VDC subsidiaries who were guarantors of the
Company’s pre-bankruptcy secured debt, filed the Reorganization Plan in
the United States Bankruptcy Court for the District of Delaware (In re Vantage
Drilling International (F/K/A Offshore Group Investment Limited), et al., Case
No. 15-12422). On January 15, 2016, the District Court of Delaware confirmed
the Company’s pre-packaged Reorganization Plan and the Company emerged
from bankruptcy on the Effective Date.
Pursuant to the terms of the Reorganization Plan, the pre-bankruptcy term loans
and senior notes were retired on the Effective Date by issuing to the debtholders
4,344,959 units in the reorganized Company (the “Units”). Each Unit
of securities originally consisted of one New Share and $172.61 of principal
of the Company’s 1%/12% Step-Up Senior Secured Third Lien Convertible
Notes due 2030 (the “Convertible Notes”), subject to adjustment
upon the payment of interest in kind (“PIK interest”) and certain
cases of redemption or conversion of the Convertible Notes, as well as share
splits, share dividends, consolidation or reclassification of the New Shares.
The New Shares and the Convertible Notes are subject to the terms of an agreement
that prohibits the New Shares and Convertible Notes from being traded separately.
The Convertible Notes are convertible into New Shares in certain circumstances,
at a conversion price (subject to adjustment in accordance with the terms of
the Indenture for the Convertible Notes) which was $95.60 as of the issue date.
The Indenture for the Convertible Notes includes customary covenants that restrict,
among other things, the granting of liens and customary events of default, including
among other things, failure to issue securities upon conversion of the Convertible
Notes. As of December 31, 2017, taking into account the payment of PIK interest
on the Convertible Notes to such date, each such Unit consisted of one New Share
and $175.90 of principal of Convertible Notes.
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