BP puts Diamond’s semi-sub on standby rate

Houston-based drilling contractor Diamond Offshore has informed that its new drilling rig the Ocean GreatWhite is now under a reduced standby rate with the oil major BP. 

Diamond’s harsh-environment sixth-generation, semi-submersible drilling rig, the Ocean GreatWhite, was delivered by South Korea’s Hyundai Heavy Industries in July 2016. Ocean GreatWhite, measuring 123 m in length and 78 m in width, is capable of operating in waters up to 3 km deep and drilling down to a depth of 10.67 km from the sea surface.

The rig, described as the largest of its kind in the world, was hired by BP for its Great Australian Bight drilling campaign, offshore Australia. Following BP’s cancellation of the exploration program, the rig remained on contract. According to Diamond’s latest fleet status report on Monday, the rig is under the contract with BP until mid-January 2020.

However, while the oil giant is looking for an alternative assignment for the rig, the semi-sub has been put on a standby rate.

Marc Edwards, President and CEO, said in Diamond’s 4Q 2016 earnings call on Monday: “For the immediate future, the decision has been made to place the rig into an extended standby period during which alternative drilling opportunities for the rig will be considered. This extended standby period, with the asset moored in Malaysia, keeps key personnel on the rig at a lower operating cost than what we would have experienced operating in the harsh environment of the Great Australian Bight. As a result, we have worked with BP to lower the rig operating expense and to pass cost savings over to them in the form of a new standby rate. This revised rate still enables Diamond to maintain the same operating margin and cash flows of the original contract.”

Edwards further added: “We view this structure as beneficial to both Diamond Offshore and BP, as it allows Diamond to keep the rig partially crewed, under contract, and maintained with the same operating margins, while our partner is able to reduce expenditures, as they source other work for the rig. This is a win-win for both parties. And we now have the only Moss CS60 design harsh-environment semi that has been delivered from a shipyard. In summary, the Ocean GreatWhite has commenced a three-year contract at a revised dayrate that protects our original contract margins.”

Meanwhile, the driller returned to profit for the fourth quarter of 2016 with a net income of $73.06 million, compared to a loss of $245.4 million in the corresponding period of 2015.

Offshore Energy Today Staff

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