More woes for Ocean Rig as another rig contract hangs in the balance

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Less than a fortnight has passed since Ocean Rig UDW Inc. an offshore driller run by the shipping magnate George Economou, lost a drillship contract with Eni, and now the company is facing another challenge.

Ocean Rig on Monday said that it has received a notice of breach of material obligations from Premier Oil under the drilling contract for the Eirik Raude semi-submersible drilling rig.

The driller did not say what exactly the notice read. It did say this: “Ocean Rig is evaluating the contents of this notice and its options under the contract.”

Premier Oil, an independent oil and gas company based in the UK, has been using Ocean Rig’s Eirik Raude drilling rig for offshore drilling in the Falkland Islands. It is unclear if the notice of a breach of contract also means Premier wants to end the contract prematurely.

Offshore Energy Today has reached out to Premier Oil seeking more details. In a response, a Premier Oil spokesperson declined to comment on the matter, citing “a confidential contractual dispute.”

“I can confirm that at present there has been no changes to Premier’s drilling programme,” the spokesperson said.

According to available info, following a successful re-drill of the Isobel/Elaine complex in the Falklands in January, the drilling rig was supposed to move north of the well to complete the drilling of the Chatham exploration well. It is unclear if the Chatham exploration well has been spudded yet.

End is nigh?

If the contract, at the end, gets terminated, this might mean the end is nigh for the Ocean Rig’s semi. Ocean Rig owns two semi-submersible drilling rigs -Eirik Raude and Leiv Eiriksson – in its fleet otherwise made up of drillships.

The driller in October 2015, said that there were few prospects of employment for the two semis, and if no employment is found the rigs will be cold stacked, and either disposed or scrapped. The Eirk Raude contract was to expire in January 2016, and the Leiv Eiriksson one in March.

At the time, we made a poll, asking our readers to respond to this question: “Will Eirik Raude & Leiv Eiriksson be scrapped in 2016?” The readers then chose to give the rigs a chance, as slight as it may be, with 52.4% saying the rigs won’t be scrapped, and 47.6% seeing the rigs going to the scrapyard this year.

The readers were less merciful last month, when we asked if they thought if Ocean Rig would cold stack the Ocean Rig Olympia drillship, a 6th generation ultra-deepwater rig built in 2011, following a loss of contract with Italy’s Eni. Almost five hundred people voted, with 80 percent expecting cold stacking for the young drillship.

Not the first contract breach notice

This is not the first time Ocean Rig is being served with a contract breach notice. In October 2015, Ocean Rig said it had received a notice from its customer in Brazil, Repsol Sinopec, claiming the driller had breached a contract obligation under its Ocean Mylos drillship charter.

The notice of material breach entitled Repsol Sinopec to terminate the contract if such breach is not fixed within 75 days.

Ocean Rig then dismissed the notice as “totally without merit” and said it would “vigorously defend our rights under the contract.” The Mylos has been under the contract with Repsol Sinopec since August 2013.

Under the original deal, the drillship is expected to stay with Repsol Sinopec until the third quarter of 2016. The drillships AIS data shows it is currently moored some 165 nautical miles east of Rio de Janeiro. The status of the spat between Repsol Sinopec and Ocean Rig remains unclear.

Offshore Energy Today Staff

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Posted on February 1, 2016 with tags .

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