Houston-headquartered drilling contractor Rowan says it has reached an agreement with one of its customers for the early termination of the drilling contract for the ultra-deepwater drillship Rowan Relentless.
The contract with Freeport-McMoRan was scheduled to scheduled to terminate in June 2017, but due to lack of work and a recent restructuring a of Freeport’s oil and gas business caused by the downturn in oil prices, the two companies have worked out a deal to end terminate the contract early.
The agreement provides that the drilling contract will be terminated immediately, and Freeport will pay Rowan $215 million in cash to settle outstanding receivables and early termination. Rowan says it may also receive additional contingent payments from Freeport in the amount of $10 million and $20 million, respectively, depending on the average price of oil over a 12-month period.
Rowan now says it expects to reduce its costs for the Rowan Relentless by efficient warm stacking of the rig.
“I am satisfied with this resolution given FMOG did not have any ongoing work for theRowan Relentless,” said Tom Burke, President & CEO of Rowan, commented. “This accelerated payment provides additional liquidity to further strengthen our balance sheet and affords Rowan added flexibility as we review opportunities in this down market. The Rowan Relentless, our fourth high-specification ultra-deepwater drillship, had outstanding operational performance on this contract, delivering safe, reliable and efficient operations.”
Rowan’s fleet consists of 31 mobile offshore drilling units, comprised of 27 jack-up rigs and four ultra-deepwater drillships. The three other drillships are all under contract in the Gulf of Mexico for different customers until April 2017, October 2018 and February 2018, respectively.
Rowan Relentless was delivered in Q3 2015 and immediately commenced the two-year contract with Freeport McMoran.