Ocean Rig could scrap its semi-submersible rigs

Ocean Rig UDW, an ultra-deepwater drilling contractor, might soon be regarded solely as a drillship provider, as the company is considering scrapping its semi-submersible drilling rigs.

Namely, in its fleet status report issued on Wednesday, the company said that the outlook for further employment of its Eirik Raude and Leiv Eiriksson semi-submersible rigs was bleak.

The Eirik Raude is currently completing its third well in a six-well program in the Falklands and is now expected to remain employed in the Falkland Islands into January of 2016.

As for the Leiv Eiriksson, the rig is completing a well in Norway. The rig’s contract expires in March next year.

Ocean Rig 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.

It’s not only semis that are facing an uncertain destiny. A drillship, the Ocean Rig Olympia, which started its new contract in Angola as of August 15, 2015, set to expire in June 2016, could be cold stacked if no further work is secured.

Contract breach in Brazil

On top of this, the company revealed that it had received a notice from its customer in Brazil, Repsol Sinopec, claiming the driller had breached a contract obligation under its Ocean Mylos charter.
The notice of material breach entitles Repsol Sinopec to terminate the contract if such breach is not fixed within 75 days.

Ocean Rig has 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.

Still on drillships, the Ocean Rig Skyros has kicked off its new six-year contract in Angola as of October 1, 2015. The drillship has been hired by the French oil major Total, and will stay with the company until 3Q 2016.

The Leiv Eiriksson is in the process of completing its current well in Norway. As of the date of this press release, there is no further program for the unit under its current contract which is expected to expire in March 2016. Currently, there are few further prospects of employment for the rig and if no work is found the rig will be cold stacked and the Company will consider all its options including disposing or scrapping the unit.

George Economou, Chairman and CEO, said: “The market continues to remain challenging due to the massive spending cuts initiated by the oil companies. In this environment, cash preservation and liquidity remain our number one priority and we will adjust our available capacity to the new market conditions. For rigs that we cannot secure long-term employment that are coming up for their 5-year SPS we will cold stack the units and in the case of the semi-submersible rigs seriously consider all our options including disposal or scrapping.”

Offshore Energy Today Staff

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Posted on October 8, 2015 with tags .

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