(Reuters) - International offshore driller Ocean RIG UDW Inc (ORIG.O) filed for Chapter 15 bankruptcy protection in a U.S. court late Monday, hit by cancellations as major oil producing customers withdrew from deep water projects amid falling oil prices.
The Cayman Islands holding company, which spent heavily on new drill ships earlier in the decade, said lower oil prices will continue to weigh on client demand during 2017. More than half of its drilling units are currently inactive.
In a filing with the U.S. Bankruptcy Court in New York, Ocean Rig UDW President Antonios Kandylidis said the company had reached an agreement with a group of lenders to convert $3.7 billion of debt into new equity.
Kandylidis said the Chapter 15 filing aims to protect the restructuring deal from distressed debt investors who had hoped to make money after buying the company's bonds during a steep oil price decline last year. He called the "vulture investors" move "a bad bet."
Chapter 15 of the U.S. Bankruptcy Code enables a foreign company to obtain protection from creditors looking to seize its assets in the country.
As the price of crude has slumped more than 50 percent since 2014, oil companies have cut back on rig hires, leaving many vessels idle and prompting owners to restructure operations to preserve cash.
Global oil prices have rallied recently, prompting oil and gas producers to ramp up spending. But some companies have lagged as surplus offshore rigs built during the boom are now lying idle, while debt repayments must still be honored.
Bigger rival Seadrill (SDRL.OL), saddled with $14 billion in debt and liabilities, said last month it may have to file for Chapter 11 bankruptcy protection if it fails to reach a restructuring agreement with lenders.
Last year, Hercules Offshore Inc filed for bankruptcy protection, six months after emerging from its first bankruptcy.
Shares of Ocean Rig, which reached a high of $19.87 in June 2014, plunged 61 percent to 27 cents in midday trading on Tuesday.
Reporting by John Benny in Bengaluru and Tracy Rucinski in Chicago; Editing by Anil D'Silva and David Gregorio