Drilling Rig Termination Unlawful Say Diamond Offshore

Published at 02:30PM - 02/09/16

The offshore drilling firm Diamond Offshore announced it has lost a contract for the Ocean Valor offshore semi-submersible drilling rig.

The company received a notice of contract termination from the Brazilian giant Petrobras for the cancellation of the offshore unit on August 30, it announced in a statement.

“The company does not believe that Petrobras had a valid or lawful basis for terminating the contract and the company intends to defend the rights of its subsidiary under the contract,” Diamond Offshore stated.

Drilling Rig Terminated By Petrobras

The Ocean Valor drilling rig was operating in Brazil on a standby rate until the end of August. Diamond Offshore is disputing the contract termination although the company is not expected to get anything in return from Petrobras, analysts say.

The drilling contract for Ocean Valor was estimated to conclude in October 2018, having already been granted an extension in 2014.

Ocean Valor is an ultra-deep water semi-submersible drilling rig built by Sembcorp Marine’s Jurong Shipyard in Singapore.

Petrobras Terminates Drilling Rig Contract
Ocean Valiant is to drill 13 wells in the UK for Maersk

The rig was built in 2008 and entered service in 2009. It can accommodate 164 crew members and operate in a water depth of 10,000 feet, drilling as deep as 40,000 feet.

Since its delivery, the semi-submersible drilling rig has been working for Petrobras.

Drilling Rigs Contracted Offshore UK and Mexico

According to media reports, the early termination represents approximately 26 months of backlog loss, a total of nearly US$355 million (£267.6 million), which comes as an unexpected blow to Diamond Offshore.

Meanwhile, Diamond Offshore’s Ocean Valiant was awarded a one-year contract in the UK by Maersk to drill 13 wells.

Additionally, the jack-up rig Ocean Scepter was awarded a 19-month contract in Mexico with Fieldwood, after having been cold stacked.

Diamond Offshore currently has 14 rigs cold stacked, according to the fleet report disclosed today.

In its earnings results for the second quarter, Diamond Offshore reported weaker earnings, down by 17.4% quarter over quarter.