By Stephen Treloar and Mikael Holter

(Bloomberg) — Seadrill Ltd., the offshore driller with the largest debt load, reached a cope with its banks to increase its three nearest credit score strains and amend covenants because it seeks to ease its burden amid a drop within the demand for offshore rigs.

In the “first phase of a broader plan to refinance and recapitalize the business,” Seadrill prolonged two credit score services maturing this 12 months and one other maturing in 2017 for its North Atlantic Drilling Ltd. unit, in keeping with an organization assertion Friday. Banks additionally agreed to ease covenants — situations put in place by lenders associated to a borrower’s total debt ranges — till June 30, 2017.

Shares of the corporate rose 11 % to 41.39 kroner at 10:02 a.m. in Oslo, the very best in additional than a month.

“This is an important first step in our funding plan,” Chief Financial Officer Mark Morris mentioned within the assertion. “By deferring our imminent borrowing maturities, resetting a number of covenants and removing the risk of facility prepayments related to declining rig values we have established a more stable platform to pursue and conclude negotiations with our stakeholders.”

Offshore drillers are struggling to repay debt as competitors and lowered spending by oil corporations harm earnings. Falling demand for rig companies is forecast to scale back gross sales on the world’s largest offshore contractors by 25 % this 12 months and no less than 10 % in 2017, in keeping with Bloomberg Intelligence analyst Andrew Cosgrove.

Seadrill agreed to a timetable for discussions a couple of long term resolution and gained’t draw down on its revolving credit score services whereas it’s negotiating, the driller mentioned. It sees talks with stakeholders concluded by 12 months finish, which is later than beforehand indicated.

While the corporate is “kicking the can down the road,” Friday’s announcement is optimistic, Janne Kvernland, senior oil companies analyst at Nordea Bank Norge ASA, mentioned in a be aware.

The accord “shows willingness, particularly from the banks, to come to an agreement,” Kvernland mentioned. “Clearly, that is required in order to save the company” as a result of it nonetheless has a funding requirement of about $2.5 billion by 2018, she mentioned.

The settlement comes after Seadrill bought its remaining stake in SapuraKencana Petroleum Bhd for about $195 million earlier this week. That transfer confirmed the corporate is working actively on bettering its stability sheet, in keeping with Kvernland.

© 2016 Bloomberg L.P