Ensco, a UK-based offshore drilling contractor, has informed it has lost a drillship contract it had with a U.S.-based oil company.
Namely, Ensco said on Wednesday ConocoPhillips terminated the three-year ENSCO DS-9 drillship contract.
Ensco says that under the terms of the contract, ConocoPhillips is obligated to pay Ensco termination fees monthly for two years equal to the operating day rate of approximately $550,000, which may be partially defrayed should Ensco re-contract the rig within the next two years and/or mitigate certain costs during this time period while the rig is idle and without a contract.
The drilling contractor further says that ConocoPhillips is also contractually obligated to reimburse certain costs that Ensco incurs due to the termination of the contract for ConocoPhillips’ convenience. Given these contract terms, Ensco does not anticipate a material negative impact to its financial results for 2015 and 2016 as a result of this termination.
ENSCO DS-9 was recently delivered and had been scheduled to begin its initial drilling contract for ConocoPhillips in the fourth quarter of this year.