How Diamond Offshore's bankruptcy filing affects energy ETFs

Jason Bloom, director of global macro ETF strategy at Invesco, Tom Lydon, CEO of ETF Trends and ETF Database, and Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA Research, discuss how Diamond Offshore Drilling's bankruptcy filing could affect energy-related ETFs. With CNBC's Bob Pisani.

Diamond Offshore Drilling filed for bankruptcy protection in Texas on Sunday, after the company recently skipped making an interest payment and said it had retained restructuring advisers.

The Houston-based contract drilling company’s filing, one of 15 of its group companies seeking protection under Chapter 11, said day rates and demand for its services had “worsened precipitously” this year amid a “price war” between OPEC and Russia and the steep drop in oil demand caused by the coronavirus pandemic.

The company has significant operations in the Gulf of Mexico.

The filing comes as the five biggest U.S. and European firms have cut spending an average of 23% in response to the drop in oil demand caused by the coronavirus pandemic. The companies are Exxon Mobil, Royal Dutch Shell, BP, Total and Chevron.

Global spending on oilfield equipment and services is forecast to fall 21% this year to its lowest level since 2005. Oil futures prices last week closed below $0 for the first time in history.

Chevron, BP and others have been reducing deepwater drilling projects, including the U.S. Gulf of Mexico, where some of Diamond’s drilling rigs are located.

Loews was Diamond Offshore’s largest shareholder, with 53% as of April 3, according to Refinitiv.

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