Borr Drilling gets early terminations but also new drilling contracts

Offshore drilling contractor Borr Drilling has received notices of early termination for several of its drilling rig contracts, but it has also been awarded new contracts for its rigs. As a result, Borr’s total revenue backlog has been impacted negatively by about $16 million.

Borr said in an update on Monday it had been awarded letters of award for work in the Asia Pacific region for two of its premium jack-ups, of which one is a newbuild being activated.

The contracts’ estimated duration, excluding options, will be for 365 days and 200 days, respectively. The rigs are expected to start their contracts in the third quarter of 2020.

Furthermore, the company has received notices of early termination of contracts from ExxonMobil for the rigs Gerd and Groa, which are working in Nigeria under contracts originally committed until April 2021 and May 2021, respectively.

The contracts for both rigs require 180 days notice for early termination and the company is in discussions with ExxonMobil with regards to planning the discontinuity of operations for both rigs following the early termination notices.

The company has received notice to stop operations for the Norve rig, working in Gabon for BW Energy. The rig finished operations in early April 2020, around three months before previously estimated.

The company has received a notice of early termination for the semi-submersible MSS1, which finished its contract on 25 March 2020, one month earlier than previously estimated. The rig is entitled to an early termination fee as per contract provisions.

Following its campaign with Neptune, the Prospector 5 rig has arrived in Harwich. The company received notification from its follow-on customer, Perenco, electing not to proceed with the previously announced contract for the rig. The rig is scheduled to start operation for CNOOC in the North Sea between September and November 2020.

The net impact of the new contracts and the early termination of the existing contracts is estimated to affect the total revenue backlog negatively by approximately $16 million.

Furthermore, the rigs Odin and Galar have started operation for Pemex during 1Q 2020, and the Njord is expected to start operations with Pemex shortly. The rig Saga started operation in Vietnam for Eni in February 2020.

Borr Drilling said it is experiencing the impact of current unprecedented market conditions and the global market reaction to the COVID-19 pandemic, in particular as a result of the practical issues arising from government-imposed travel restrictions, border closures and quarantines.

A number of customers have contractual rights in place to suspend operations in certain circumstances, and Borr could be subject to further suspension notices in light of market conditions.

At this stage, the company cannot predict with reasonable accuracy the duration of such suspensions if exercised or the impact on the company. The company has managed to keep a solid technical utilisation for the fleet in these challenging times of 99.5% YTD.

Photo source: Flickr; Author: kees torn – under the CC BY-SA 2.0 license