Oil services company C&J Energy Services Ltd. (NYSE: CJES) will enter Chapter 11 bankruptcy to rid itself of $1.4 billion in debt after reaching an agreement with a majority of its lenders, the company said July 11.

C&J, based in Bermuda, said the debt will be converted to equity stakes in the company for noteholders as the company restructures. C&J said it will continue normal operations while in bankruptcy. The company expects to enter bankruptcy by July 17, according to Securities and Exchange Commission filings.

A restructuring agreement will create a debtor-in-possession structure that will inject $100 million in financing into the company along with another $200 million of additional capital. Following emergence from bankruptcy, C&J expects to raise an additional $100 million in exit financing.

C&J is a leading provider of completion and production services, with one of the largest completion services and workover- and well-servicing rig fleets in North America.

With its substantial debts, C&J would be one of the largest bankruptcies since 2015 in the oilfield services sector. At least 72 other North American oilfield service companies have sought bankruptcy protection since 2015, towing about $11.7 billion in debt behind them.

Don Gawick, C&J president, CEO and COO, said the restructuring is a step toward de-levering the company’s capital structure and responding to a challenging market environment.

“The agreed-upon restructuring plan represents a strong endorsement by our stakeholders in the future of our company,” Gawick said. “The exchange of debt for equity will provide us with a significantly deleveraged balance sheet, and we will emerge from this process as a stronger company with an infusion of new equity capital through a backstopped equity rights offering.”

Gawick said that after reviewing its options, C&J is “confident that we have reached a deal that is highly advantageous for C&J and will provide solid financial footing to enable us to capitalize on future opportunities as the commodity pricing environment begins to recover."

Nabors Industries Ltd. (NYSE: NBR), owner of the world’s largest land-based drilling rig, owns a 53% interest in C&J. However, the company is unlikely to be affected by the bankruptcy.

C&J’s $1.4 billion in debt at a closing price of $0.60 per share would create 2.3 billion new shares of C&J.

C&J previously had just 118 million shares outstanding.

“The stake of current owners would be reduced to about 5% of outstanding shares and Nabors' 53% interest in C&J would fall to just 2.5% of total equity outstanding,” Raymond James said in a report.

“We previously ascribed no value to the C&J investment in our valuation of Nabors. We view the effects of the restructuring on Nabors as minimal,” Raymond James said.

Loeb & Loeb LLP, Kirkland & Ellis LLP and Fried, Frank, Harris, Shriver & Jacobson LLP are serving as legal counsel to the company. Evercore ISI serves as the company's financial adviser, and AlixPartners serves as the company's restructuring adviser.

Darren Barbee can be reached at dbarbee@hartenergy.com