Transocean to Take $112 Million Hit Over Rig Breakdown

Transocean Leader
Transocean Leader. Photo credit: Jan Henry Knutsen

Offshore driller Transocean will take a $112 million hit from a drilling contract amendment for its harsh-environment semi-submersible Transocean Leader.

Transocean revealed Thursday that the rig experienced equipment breakdown that could not be repaired in-time, entitling its customer with the right to terminate the contract. However, Transocean says the customer instead opted to renegotiate the contract lower dayrate and contract duration. According to the statement from Transocean:

The rig experienced equipment breakdown that could not be repaired timely, providing the customer with the right to cancel the contract. However, given the otherwise efficient performance of the rig, the customer elected to complete its program with the Leader and Transocean agreed to amend the drilling contract, signed today and effective January 13, 2018, whereby the dayrate and contract duration were modified.

The rig is currently in the shipyard for these repairs and will not earn a dayrate during the first quarter of 2018. It is expected to return to work in April of 2018, for approximately 300 days, 210 of which are with the incumbent customer and 90 days with Dana Petroleum.

Contract backlog is reduced by approximately $112 million ($73 million in 2018 and the remainder in 2019) as a result of the contract renegotiation and a new fixture with Dana Petroleum.

The Transocean Leader has been under contract with Enquest in the U.K sector of the North Sea since 2015, according to Transocean’s latest fleet status report. The contract was set to expire in May 2018.