Drill rig operator Seadrill warned investors that its shares will lose almost all of their value and its bonds will be hit as the Norwegian company prepares for potential bankruptcy proceedings to restructure $14 billion in debt and liabilities.

Shares in Seadrill, once the crown jewel in shipping tycoon John Fredriksen’s empire, fell as much as 46 per cent to a record low. The company has been hit by low oil prices, which have forced oil companies to cut costs, hammering
rig rates.

Seadrill, which first warned in February that Chapter 11 bankruptcy protection was a risk, said in a statement that its banks and other lenders had agreed to extend restructuring talks by three months to July 31.

In February, finance sources said Fredriksen, who owns almost a quarter of Seadrill, might put in more of his own money if other investors followed suit. Fredriksen has put up money in the past when a restructuring of his other businesses was required. But Seadrill’s statement dampened these prospects.

The company is negotiating with more than 40 banks, including Norway’s DNB, Sweden’s Nordea and Denmark’s Danske Bank, as well as with bondholders and several rig-building yards.

Seadrill said extending the deadline of the talks would allow additional time to negotiate with banks as well as potential new investors, but the outlook was grim for shareholders.

"We currently believe that a comprehensive restructuring plan will require a substantial impairment or conversion of our bonds, as well as impairment, losses or substantial dilution for other stakeholders," Seadrill said.

"As a result, the company currently expects that shareholders are likely to receive minimal recovery for their existing shares ... We expect the implementation of a comprehensive restructuring plan will likely involve schemes of arrangement or Chapter 11 proceedings," it said.