Seadrill Limited (SDRL​) stock plunged nearly 13% on its 4Q financial results, which, despite better-than-expected results, saw the company admit that Chapter 11 bankruptcy could be in its future.

For the better part of a year, debt has loomed large over Seadrill’s future. In November 2016, it reached an agreement to postpone a debt restructuring agreement until April 30, 2017. On June 30th, $2.5 billion worth of debt matures. These two deadlines could drive the company into Chapter 11 proceedings unless it can conclude some sort of consensual restructuring agreement with debt holders. (See also: Seadrill Delays Debt Restructuring to April.)

Any new agreement is likely to involve additional amendments to the currently proposed bank amendments and a conversion of bonds to equity. Current stakeholders could face substantial dilution, along with potential financial losses. But bondholders will have to decide whether a diluted piece of the company is better than picking over scraps in bankruptcy proceedings.

Seadrill ramped up its fleet quickly between 2008 and 2013 when the market favored new offshore drilling. But once the price of oil collapsed, so did orders for new rigs and jackups. The company has committed to an aggressive capital expenditure program while losing some of its contracts. The filing admits a weak short-to-medium term outlook, fighting drilling contractors for opportunistic spot work at day rates that sometimes don’t break even. (See also: How Seadrill’s Stock Price Fell 10% in 6 Months.)

The report does contain some bright spots. Net interest-bearing debt continues to fall, $8.4 billion currently, down from $9.9 billion one year ago. EPS is $0.24, slightly better than what the street expected. And, as CEO Per Wullf said, “Our scale and young fleet position us well for the eventual recovery in the industry.”

Whether Seadrill as it exists now makes it to that recovery is the question. Revenue is $667 million for the quarter, down around 30% from the fourth quarter of 2015. Wullf sees improved bidding activity and stabilized oil prices, but doesn’t expect day rates to improve in 2017. Seadrill has cut its workforce to the bare minimum needed to run the company; the next round of trimming will lead to scrapped and cold stacked rigs. Wullf remains optimistic, though, assured that his stakeholders “have demonstrated a desire to be part of a solution to our restructuring requirements with the right structure and terms."

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