Transocean has cancelled a $550,000-a-day rig lease to Burgundy Global Exploration of the Philippines, the company having failed to lodge the required escrow.
The cancellation came within just a few weeks of the contract to hire the rig, C Kirk Rhein, to Burgundy. It marked a 52% jump from the previous $362,000 a day arrangement with Sasol.
A second cancellation involving Transocean, and already reported in the Press and Journal, is Oilexco’s $340,000 day-rate contract for the use of the Sedco 712.
Aberdeen-headquartered Oilexco demobilised the Sedco 712 rig on January 5, just two days before administrators took over the running of the company. As far as the drilling contractor is concerned, this contract, which doesn’t expire until March, 2010, “remains in full force and effect”.
In both instances, the client ran out of money – in Oilexco’s case, the debt-laden company had no option but to put itself into administration – and Transocean has stated that it is pursuing “appropriate remedies”.
There is a saying that bad news comes in threes, and it did for the world’s largest drilling contractor as, besides the above bad news, the $170million deal to sell the Nordic rig to Kuwait-based PetroGulf was terminated.
Energy reported on rig contract problems in December and Transocean’s troubles are simply the latest manifestation of the current downturn, with further new-build and drilling-contract cancellations likely before market equilibrium is restored.
In some instances, new-build contracts are being renegotiated. The prime current example is Seadrill, which has agreed with the PPL Shipyard and Keppel FELS in Singapore to make changes to the construction agreements for four new jack-ups entered into in June last year. Seadrill initially ordered two jack-ups at the PPL Shipyard and two jack-ups at Keppel FELS for delivery scheduled in 2010.
In the amendments to the existing contracts, the yards have agreed to postpone all remaining milestone payments for the second units to be built at both facilities until delivery and revise the milestone payment schedule for the first two units.
The Norwegian drilling company has agreed to issue corporate guarantees for the remaining instalments on the first two units although, as yet, no corporate guarantees have been provided for payments of the second pair of jack-ups.
Seadrill’s CEO, Alf Thorkildsen, said in a statement: “These amendments to the existing contracts mirror Seadrill’s strong industrial relationship with the Singaporean yards.
“We are confident that these arrangements serve the best interests of the involved parties.”