Following an early termination of contracts for two Noble Corporation’s drillship, oil company Freeport-McMoRan Oil & Gas has decided to cancel another drillship deal, this time with the offshore drilling contractor Rowan Companies.
Rowan Companies on Monday announced an agreement with its customer, Freeport-McMoRan Oil & Gas (FMOG), and FMOG’s parent company, Freeport-McMoRan, in connection with a drilling contract for the drillship Rowan Relentless, which was scheduled to terminate in June 2017.
The agreement provides that the drilling contract will be terminated immediately, and Freeport will pay Rowan $215 million in cash to settle outstanding receivables and early termination of the contract. Rowan may also receive additional contingent payments from Freeport of$10 million and $20 million, respectively, depending on the average price of oil over a 12-month period. In addition, Rowan said it expects to reduce its costs for the Rowan Relentless by warm stacking of the rig.
Freeport recently announced a restructuring of its oil and gas business, which is operated through FMOG. As disclosed in Freeport’s public filings, FMOG has substantial debt and has been negatively impacted by the sustained downturn in oil prices. Before taking the step to terminate the deals with both Noble and Rowan, Freeport-McMoRan idled the three drillships in the Gulf of Mexico to reduce costs.
Tom Burke, President & CEO of Rowan, commented: “I am satisfied with this resolution given FMOG did not have any ongoing work for theRowan Relentless. This accelerated payment provides additional liquidity to further strengthen our balance sheet and affords Rowan added flexibility as we review opportunities in this down market.”
The Rowan Relentless is the company’s fourth ultra-deepwater drillship. 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.