Diamond Offshore braces for termination of six rig contracts

Diamond Offshore, a Houston-based drilling contractor, might lose several rig contracts, as its customers are looking to cut costs in a depressed market stemming from low oil prices.

In a SEC filing issued yesterday, the company has said that there is a chance that the contracts for its Ocean Baroness, Ocean Nomad, Ocean Ambassador, Ocean Nugget,  Ocean Summit, and Ocean Lexington may be terminated earlier than expected.

Brazilian oil company Petrobras has informed the drilling contractor that it does not intend to use the 2002-built Ocean Baroness ultra-deepwater semi-submersible drilling rig, any more. Diamond Offshore has said it is in discussions with the Brazilian customer regarding the rig’s contract. The drilling contractor currently has six rigs contracted offshore Brazil.

Furthermore, in the UK North Sea, Dana Petroleum is looking to terminate a drilling contract for the Ocean Nomad (1975) semi-submersible. Originally, the contract was supposed to conclude in August this year.

Diamond Offshore has said that it would fight for the Ocean Nomad contract: “We do not believe that Dana had a valid basis for terminating the contract, and we intend to defend our rights under the contract.”

In Mexico, the company has been told by a Pemex representative that the Mexican oil giant will exercise its right to terminate drilling contracts for the Ocean Ambassador (1975) semi-submersible and the Ocean Nugget (1976) and the Ocean Summit (1972) jack-up rigs. It will also cancel its drilling contract for the Ocean Lexington (1976) semi-submersible drilling unit, built in 1976.

The offshore drilling industry as a whole is facing rough times as the oil companies have reduced their drilling budgets and are looking to cut costs amid low oil prices, leading to less exploratory endeavours, and to a drop in demand for offshore drilling rigs. Additionally, older less capable rigs will find it harder and harder to get work, as more and more new, high specification rigs are entering the market.

Offshore Energy Today Staff