A U.S. judge said April 17 he would approve Seadrill Ltd.'s (NYSE: SDRL) plan to exit its Chapter 11 bankruptcy, in which the global offshore oil and gas drilling company would shed billions of dollars of debt and raise $1 billion in new investment.

U.S. Bankruptcy Judge David Jones in Houston overruled two minor objections to the reorganization plan during a 90-minute hearing.

The plan extends maturities on more than $5 billion of bank loans and converts about $2.3 billion in bond debt into equity in a reorganized Seadrill.

In addition, the plan will raise about $1 billion in new debt and equity through a rights offering led by Seadrill's largest shareholder, John Fredriksen, and investment firm Centerbridge Credit Partners LP.

"The company will have a tremendous competitive advantage with the new balance sheet," said Spencer Winters, a lawyer for Seadrill with the Kirkland & Ellis, at the April 17 hearing.

Seadrill, which competes with Nabors Industries Ltd. (NYSE: NBR) and Ocean Rig UDW Inc. (NASDAQ: ORIG), operates a fleet of more than 30 vessels and was once the largest driller by market value. The company's stock trades on the Oslo and New York stock exchanges and it has corporate offices around the world.

Following a deep drop in oil prices beginning in 2014, the offshore service industry suffered from a glut of capacity and low market rates, a problem that lingers today.

Seadrill filed for bankruptcy in September.

Mark Morris, the company's CFO, told the court that Seadrill has a modern fleet, good safety record and a strong customer base, but was burdened with more than $10 billion in liabilities. "This was all about fixing the balance sheet," he said.

Seadrill had broad support from its creditors for its plan, and much of the negotiation in the restructuring centered on a push by bondholders to provide a bigger portion of the $1 billion new investment.

The company still needs to complete various steps before it can exit bankruptcy, including payments of fees and receiving regulatory approvals.

Closer Ties With Oil Service Firms

Seadrill aims to expand relations with Schlumberger Ltd. (NYSE: SLB), the world's largest oil services firm, and other suppliers to the global oil and gas industry, its CEO told Reuters on April 18.

Seadrill plans to emerge from Chapter 11 bankruptcy proceedings in late June or early July, CEO Anton Dibowitz said.

"The confirmation is the most significant milestone in the process, and now we need to implement the plan over 60-90 days. Obviously, we would like to do it as fast as possible," he added.

Seadrill is already cooperating with Schlumberger in India to offer integrated services and may expand this to other locations and partners, although the company has no immediate consolidation plans.

"Equally, we are in discussions with all major oil service companies, and if there are opportunities that makes sense for both of us, we will certainly entertain that," Dibowitz said.