Ocean Rig gets another rig contract termination

  • Exploration & Production

Ocean Rig UDW, a global provider of offshore deepwater drilling services, announced on Tuesday that one of its drilling contracts has been terminated.

Specifically, on February 11, 2016, Total E&P Congo gave notification to terminate for convenience the long-term contract of the 7th generation ultra-deepwater drillship Ocean Rig Apollo.

As per the contract Ocean Rig says it is entitled to a termination fee that varies from 50% to 95% of the operating daily rate that will be payable over the balance of the contract.

The Ocean Rig Apollo will demobilize from Congo in due course and is available for alternative employment. In connection with the termination of the drilling contract of the Ocean Rig Apollo, the company has notified the agent under the respective loan agreement and is currently in discussions with its lenders about the consequences of such termination, Ocean Rig said on Tuesday.

Ocean Rig Apollo was built in 2015 in South Korea by Samsung Heavy Industries. The three-year contract between Ocean Rig and Total for this drillship was inked back in 2013.

In addition, Ocean Rig confirmed that Premier Oil on February 12, 2016 terminated the contract for the ultra-deepwater semi-submersible drilling rig the Eirik Raude operating in the Falkland Islands. Ocean Rig has accepted Premier Oil’s termination for convenience and is entitled to a termination fee of up to $62.9 million.

In case Premier Oil contests the payment of such fee, Ocean rig says the company intends to start arbitration proceedings without any further notice. 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.”

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