By Nerijus Adomaitis
OSLO (Reuters) - Shares of offshore driller Fred. Olsen Energy (FOE.OL) took another dive on Wednesday after it said it stopped paying its creditors to preserve liquidity, in the latest example of a rig firm falling victim to slow demand recovery in the sector.
The company's shares were down 19 percent at 1023 GMT, underperforming the European oil and gas index (.SXEP) which was down 0.6 percent. This brings the share price losses to more than 70 percent since the beginning of the year.
On Monday, the stock fell as much as 27 percent after it failed to win an extension on the terms of its debt agreements.
A number of offshore drillers, including Seadrill (SDRL.N), once the world's largest rig company by market capitalisation, were forced to restructure their debts after demand fell sharply due to the oil market's downturn in 2014-2016.
Oil prices have partly recovered since hitting a low in January 2016, and while demand for drilling rigs is expected to increase, there is too much supply to move rates up significantly.
Consolidation of smaller players could help the drilling market's recovery, Seadrill's Chief Executive Anton Dibowitz told Reuters on Tuesday.
"Anybody with the fleet of less than 10-15 rigs probably needs to be consolidated ... All who don't have scale are candidates for consolidation," he said.
Fred. Olsen Energy, controlled by Bohneur (BON.OL), a holding company of the Olsen family which earned fortunes from a shipping business going back to 19th century, had earlier warned that it may need new equity and impairment of its bank and bond loans.
The decision to stop paying financial creditors meant that it would not pay a scheduled semi-annual instalment under its bank facility, it added.
At the end of 2017, the company had $759 million (574.56 million pounds) outstanding under a credit facility with a consortium of banks, and a bond loan of 1 billion crowns ($122 million) maturing in February 2019.
It made the first semi-annual instalment of 95.5 million in the first quarter.
Nordic banks DNB (DNB.OL), Danske (DANSKE.CO) and Nordea (NDA.ST) hold the bulk of Fred. Olsen Energy's bank debt.
Fred. Olsen Energy said it would operate as normal and will pay its suppliers and trade creditors in due course, while it continued "constructive" talks with its financial creditors.
The company has seven floating rigs, of which only one is employed under short-term contract with BP (BP.L).
(Reporting by Nerijus Adomaitis, editing by Emelia Sithole-Matarise)