Contractors face more cancellationsWith oil prices at record lows and operators cutting budgets and projects, the last thing rig contractors want to see are contract cancellations. Recently, five of the largest contractors - Diamond, Global Marine, R&B Falcon, Sedco Forex, and Transocean - experienced contract cancellations. Some were canceled out by newer contracts. The record thus far:
- Diamond Offshore: Diamond and BP recently agreed to terminate the contract of the Ocean Clipper drillship. The contract was canceled due to performance failures with the vessel's BOP control system. This has resulted in the vessel's move to the shipyard for replacement of the BOP and the installation of additional upgrades, which will keep it out of operation until the second quarter of this year. The Ocean Liberator semisubmersible is also now available after Agip decided against extending its contract following work off West Africa on the Kitina Field. However, Diamond did rally from this bad news with a bit of good news from Amoco. Amoco has contracted for the Ocean Alliance semi for a two-well program with two one-well options in Angola's deepwater region. The contract is expected to generate revenues of $19.8 million with the two-well program lasting 120 days. The rig is currently in transit to West Africa from the North Sea. Amoco was eyeing Transocean's Discoverer 543 for the program, but opted for the Alliance instead.
- Global Marine: Ocean Energy is in negotiations with Global Marine for the cancellation of the contract for the jackup Glomar Adriatic IX off Côte d'Ivoire. Following three dry holes, the company decided to call it quits and try to negotiate for the contract termination. The company is reportedly trying to balance the remainder of the contract value by contracting Global rigs for work on the company holdings in the Gulf of Mexico. If the deal goes through, the Adriatic IX will be ready-stacked off Gabon. Global already has one rig staked in the region, the Glomar High Island III jackup, which was recently moved from ready to cold stacked following its release by Texaco in September of last year. On the positive side for Global, the company did receive an extension on the contract of the Glomar Adriatic VIII jackup from Mobil Nigeria through 1999.
- R&B Falcon: Mobil North Sea has terminated the contract on R&B's Jack Bates semi. Mobil has alleged the cancellation was due to "certain performance breaches" relating to equipment and personnel deficiencies. R&B contends that it believes no such breach was made and is intending to pursue legal remedies to enforce the company's rights under the contract. However, R&B Falcon is making up for this with the finalization of the contract with Vastar for a new RBS8D deepwater semi. The contract calls for a primary term of three years at an operating day rate of $199,950 and includes five one-year options. Vastar also is granted an option to extend the primary term
Diamond Offshore contracted for the Ocean Alliance and terminated the Ocean Clipper.
to five years with three one-year extensions at which the day rate would range between $189,200 and $199,200, depending upon when the primary term is extended. R&B has also signed a $300 million contract with Hyundai Heavy Industries of South Korea for the construction of the rig. Delivery is scheduled for November 2000.
- Sedco Forex: Mobil recently gave Sedco notice of early termination of its contract for the Trident VI jackup. The rig returned to Mobil in Nigeria from Gabon where it was sublet to Perenco. The rig will be released in April.
- Transocean: Transocean and the Terra Nova owners have agreed to cancellation of the two-year contract for the Transocean Explorer semi. Terra Nova attributes the decision to cancel the contract to the Explorer being an older rig in
need of extensive and costly upgrading. The company has decided to seek a more modern and efficient rig in order to reduce the costs of the program. Transocean intends to submit a bid. The termination is contingent upon payment from Terra Nova to Transocean of $40 million.
Nabors, Pool mergeFollowing along the new mega-merger trend of operators, drilling contractors have thrown a second hat in the merger ring in recent months. Fresh off news of the completion of the R&B Falcon-Cliffs Drilling merger, Nabors Industries and Pool Energy Services have finally come to terms on their long-awaited merger. The boards of both companies unanimously agreed to approve the merger for a tax-free, stock-for-stock transaction. Pool shareholders will receive 1.025 shares of Nabors common stock for each share of Pool that they own, for a total value of $518 million. Nabors began publicly courting Pool in October with a proposed offer of a combination of stock and cash. Pool subsequently rejected the offer in anticipation of a sweetened deal, which they obviously were given. The combined company will re-enforce Nabors position in the drilling market. Nabors already holds the title as the largest land driller in North America, which will be further enhanced with the acquisition, as well as increase the company's offshore position from 36 rigs to 60, both domestically and internationally.
- Friede Goldman Offshore has taken possession of the second bare-deck hull from Ocean Rig. The hull for the Bingo 9000-2 semi recently arrived at the yard in Pasacagoula, Mississippi, the location of the company's first semi, Bingo 9000-1, currently under construction. The hull was transported in sixty days from the Dalian New Shipyard in China in accordance with schedule. Pre-fabrication of the deck modules has already been completed at the yard. Delivery of the completed rig is expected in December. The first Bingo is set for delivery in August.
- Pride International has entered into loan agreements worth $240 million with a Japanese training company for the long-term financing of the construction of two semisubmersibles: Amethyst 6 and Amethyst 7. The rigs are currently under construction in South Korea and will work for Petrobras for seven years upon completion. Pride also announced that the refurbishment of the Pride Kansas jackup is now completed and the rig is mobilizing for work under a long-term contract in the Gulf of Mexico with Chevron.
The contract on the jackup was amended to extend from two to four years at a day rate of $30,000.
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