When reality catches up to an overextended company, the spectacle can be ugly.

Shares of Seadrill (SDRL) - Get Report were plummeting by 58% on Tuesday, after the offshore drilling contractor warned that its debt restructuring process would result in significant losses for its shareholders and bond investors. The most likely outcome is that the beleaguered company will end up in bankruptcy court.

The stock's plunge comes in the wake of the company's announcement on Tuesday that it had cobbled together an agreement with its bankers to extend its debt restructuring process to July 31 from April 30. The company stated:

"We currently believe that a comprehensive restructuring plan will require a substantial impairment or conversion of our bonds, as well as impairment, losses or substantial dilution for other stakeholders. As a result, the company currently expects that shareholders are likely to receive minimal recovery for their existing shares."

Many investors year to date have been overly optimistic about Seadrill's prospects, as oil prices rise. Oil prices currently hover at $50 per barrel, better than the lows of the $20s in February 2016, but still lower than the highs of over $100/bbl reached in mid-2014.

During those exuberant moneymaking days in the energy patch, energy companies such as Seadrill piled on the debt to expand around the globe. Now, scores of companies in the energy patch face bankruptcy and many banks are grappling with toxic loans on their balance sheets. Seadrill is the latest victim and it won't be the last.

Seadrill's earnings trajectory appears grim. The average analyst expectation is that the company's year-over-year earnings growth will come in at -100% in the next quarter, and -49.1% over the next five years (on an annualized basis).

That sort of profit performance is hardly sufficient to cover the company's staggering debt. SDRL's total debt stands at $10 billion, for a total debt-to-equity ratio of 99.79, compared to the debt/equity ratio of 69.6 for its industry. Seadrill's operating cash flow is a paltry $1.1 billion.

Seadrill now has the dubious distinction of accumulating the most "sell" ratings among its peers, which include struggling and indebted drillers Transocean (RIG) - Get Report and Halliburton (HAL) - Get Report .

If you own Seadrill, dump it as quickly as possible. A turnaround isn't in the cards; the stock has nowhere to go but down.

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John Persinos is an analyst with Investing Daily. At the time of publication, he owned none of the stocks mentioned.