Harvey Gulf International Marine, a New Orleans-based company that provides offshore supply, crew and multi-purpose construction and support vessels for Gulf of Mexico deepwater drilling operations, has filed for bankruptcy protection, listing about $1.2 billion in debt.
The legal development marks the latest sign of stress amid a global slowdown in oil-drilling activity and a prolonged slump in oil prices, which reached $115 per barrel in June 2014 but later plunged to less than half of that. The downturn has been felt throughout Louisiana and the Gulf Coast.
Oil prices hovered around $62.49 to start this week.
The filing, under Chapter 11 in the Southern District of Texas, includes a restructuring plan that would convert nearly $1 billion in secured debt into equity. The plan, which requires court approval, is intended to help the company clear up its balance sheet ahead of when its CEO, Shane Guidry, expects the hard-hit drilling industry to begin to rebound — possibly by 2020.
In court filings, Harvey Gulf lists between 200 to 999 creditors and assets worth between $100 million to $500 million. HGIM Holdings's filing includes dozens of affiliates that are also seeking bankruptcy protection together.
Harvey Gulf has about 580 employees, including about 504 crew members, court filings show. The company's fleet includes 60 vessels, which are almost entirely offshore supply vessels.
In an interview Thursday, Guidry said it was important for Harvey Gulf to act now and get ahead of 2020, when it faced a nearly $818 million obligation.
Guidry predicted that the drilling market will begin to turn around by then, and expects Harvey Gulf will be positioned to take advantage of it.
"It makes sense to work with our lenders to do a little debt for equity swap, reset the clock and get ready for the upturn that should be here in 2020," he said.
An emergency hearing on the company's plan is scheduled for Friday in federal bankruptcy court in Houston.
In a 91-page declaration included with the filing, Guidry described a four-year downturn in energy prices that have hit the offshore supply boat and service sector particularly hard.
"Beginning in 2014, as a result of severely depressed oil prices, exploration and production companies drastically cut the number of offshore exploration and drilling projects in the Gulf of Mexico, causing substantial drops in both vessel utilization and day rates," Guidry's filing says.
Through early last year, Harvey Gulf took measures to weather the downturn, such as cutting $87 million in costs and idling unprofitable vessels.
Now, after months of negotiations, the firm's planned conversion of nearly $1 billion of secured debt into equity is expected to "right-size" its balance sheet, eliminate amortization payments and reduce its interest expenses by roughly $47 million annually, documents show.
Harvey Gulf dates back more than a half-century. Guidry's grandfather, Numa Guidry, started it as a fishing company in 1946. By 1955, Numa Guidry had assembled a fleet of inland towing vessels that would service the Gulf Coast transportation market and naming it Harvey Canal Towing Co.
In 1965, Numa Guidry’s sons — Robert Guidry and Richard Guidry — joined the business and helped it expand into the offshore ocean towing and rig moving industry. Robert Guidry is Shane Guidry's father. The company later changed its name to Harvey Gulf International Marine.
Shane Guidry joined the company in 1988 and became CEO in 1997.
Offshore supply vessels like Harvey Gulf's support drilling, production and decommissioning activities, and represent a segment of the maritime industry that generated more than $25 billion in global annual revenues at its peak in 2013, the company's court filing notes.
However, as oil prices have fallen, exploration and production companies have significantly cut back on projects in the Gulf of Mexico, further hurting the firm's bottom line by causing "substantial drops in utilization and day rates."
The company says its restructuring plan would not hurt its general unsecured creditors, and would ensure that it stays complaint with the Jones Act, a key aspect of its business.