Deepwater drilling contractor Ocean Rig UDW has announced two drilling contracts held with two separate clients have been terminated, with CEO George Economou calling the early terminations ‘regrettable’ and describing industry prospects as ‘bleak’.
The contracts included one by TOTAL E&P Congo, which on February 11th gave the notice of termination of the long-term contract for the 7th generation ultra-deepwater drillship Ocean Rig Apollo for convenience. Ocean Rig says that, as per the contract, it is entitled to a termination fee that varies from 50% to 90% of the operating daily rate payable over the balance of the contract. The company added that the Ocean Rig Apollo will be demobilized from Congo and is available for rehire.
The second was a contract with Premier Oil, which on February 12th terminated the contract for the ultra-deepwater semisubmersible drilling rig the Eirik Raude operating in the Falkland Islands. Ocean Rig says that it has accepted Premier Oil Plc.’s termination for convenience and is therefor it is entitled to a termination fee of up to $62.9 million or face arbitration. The termination follows Ocean Rig’s announcement dated February 1 that it had receive a notice of breach of material obligations from Premier Oil under the drilling contract for the rig. Ocean Rig said that at the time it was evaluating the contents of the notice and its options under the contract.
The Eirik Raude will demobilize from the Falkland Islands in due course and is available for alternative employment.
George Economou, Chairman and CEO commented:
“It is really regrettable that two of our clients have decided to terminate drilling contracts for convenience. This is a reminder of the extremely challenging times facing the offshore drilling industry and oil companies taking unprecedented action to reduce their capital expenditures. The prospects for the industry remain bleak and we currently see limited prospects of a recovery before 2018 at the earliest.”
Ocean Rig now owns and operates 13 offshore ultra deepwater drilling units, comprising of 2 ultra deepwater semisubmersible drilling rigs and 11 ultra deepwater drillships, including one scheduled to be delivered in 2017, one to be delivered during 2018 and one to be delivered during 2019.
Last month, the Italian oil and gas company ENI terminated its contract for Ocean Rig’s Ocean Rig Olympia after a reassessment of its drilling activities due “dramatic fall of the crude oil price and the volatile market context”.