Seadrill announced a writedown of $1.2 billion on the value of its oil drilling rigs on Tuesday and warned it may have to convert part of its $7.4 billion in debt into equity to survive.
"Until such time that an agreement is reached to restructure our borrowing commitments, substantial doubt remains over (the) ability to continue as a going concern," Seadrill said in its first-quarter earnings report.
Controlled by Norwegian-born shipping tycoon John Fredriksen, Seadrill had struggled even before the COVID-19 pandemic as low oil prices dented demand for rigs.
It has now hired bankers and lawyers to overhaul its finances.
"This industry has two fundamental challenges which are emphasized by recent events - there are too many rigs carrying too much debt," CEO Anton Dibowitz said in a statement.
"We recognize, along with others in the sector, that a number of our assets are increasingly unlikely to return to the market and need to be scrapped," he said.
Seadrill's impairment charge assumed that up to 10 of its drilling rigs may not return to the market and would need to be scrapped.
The company had 35 drilling rigs, of which 18 were idle, as of March.
Following the impairment, the company reported a net loss of $1.57 billion for the first quarter versus a loss of $295 million a year earlier.
It reported $55 million in adjusted earnings before interest, tax, depreciation and amortization (EBITDA) for the first quarter, above its guidance of $35 million in February but down from $72 million a year ago.
The company on Monday announced its intention to delist from the New York Stock Exchange this month while maintaining an Oslo Bourse listing.
(Editing by Terje Solsvik and Jason Neely)