Oil exploration company Cobalt International Energy and drilling contractor Rowan Companies have agreed to amend a drilling contract for one of Rowan’s drillships allowing for an early termination.
Cobalt said on Thursday it has entered into an amendment to its drilling contract with Rowan (UK) Reliance Limited, an affiliate of Rowan Companies, which provides for the early termination of Cobalt’s long-term drilling contract for the Rowan Reliance drillship.
The pair entered into a three-year drilling contract for the drillship Rowan Reliance back in 2013, with a start date in early 2015.
The drilling contract was originally scheduled to terminate on February 1, 2018, and the amendment provides for a contract termination date of March 31, 2017.
Additionally, per the amendment, Cobalt will save 45% of the contract value between the original termination date and the new termination date, or approximately $80 million, and will pay to Rowan the remainder of approximately $98 million.
In addition, if Cobalt continues its operations with the Rowan Reliance after March 31, 2017, the dayrate will be reduced to approximately $262,000 per day for the remaining operating days.
Timothy J. Cutt, Cobalt’s Chief Executive Officer, said, “We are very glad to reach an agreement with Rowan that helps our balance sheet in the near term and secures a strong relationship with Rowan for the long term.”
Cobalt also commits to use Rowan as its exclusive provider of drilling services for five years at market rates as determined by normal indices.
Tom Burke, President & CEO of Rowan, commented: “With the cash payments from Cobalt, we will further strengthen our balance sheet, which will provide added flexibility as we review opportunities in this down market. We deeply value Cobalt as a client and we appreciate Cobalt’s faith in Rowan as evidenced by the commitment to use Rowan as its exclusive provider of drilling services for the next five years.”
The Rowan Reliance is one of four ultra-deepwater drillships constructed for Rowan by South Korea’s Hyundai Heavy Industries. All four drillships are based on a GustoMSC P10,000 hull design, capable of drilling wells to depths of 40,000 feet in water depths up to 12,000 feet.