Valaris disappointed as Equinor terminates drillship contract

Offshore drilling contractor Valaris is disappointed following the receipt of a drilling contract termination for a drillship, which was supposed to work for Equinor in the U.S. Gulf of Mexico.

The drillship DS-11 was first hired by TotalEnergies for an eight-well job on the North Platte deepwater project in the U.S. Gulf of Mexico. The contract, awarded back in 2021, was expected to begin in July 2024 and run until December 2027.

However, TotalEnergies in February 2022 decided to withdraw from the project to focus on better opportunities to allocate its capital. As a result, the contract for the drillship was left hanging in the balance until Equinor, TotalEnergies’ partner in the project, decided to take over the drillship contract.

No material changes to the contract resulted from the novation, including with respect to the termination provisions in the event the project does not receive a final investment decision (FID).

In a new update on Wednesday, Valaris announced that Equinor had delivered a termination notice for the drilling contract awarded to drillship Valaris DS-11. The termination will take effect at the end of June. Valaris’ total contract backlog of $2.5 billion as of 2 May 2022 included approximately $428 million related to this contract.

As a result of the contract termination, Valaris will receive an early termination fee. According to the rig owner, this termination fee is more than sufficient to cover expenses and commitments incurred by Valaris on the project.

The 2013-built drillship was previously known as Atwood Advantage while under Atwood Oceanics and as Ensco DS-11 while under Ensco.

President and Chief Executive Officer Anton Dibowitz said, “While we are disappointed that this contract has been terminated, the floater market and day rates have improved meaningfully since this contract was entered into in July 2021, and we expect there will be other attractive projects for a high specification drillship like Valaris DS-11 with similar or earlier commencement dates.”