Hercules loses rig contract in Saudi Arabia

After it has been announced that Diamond Offshore is facing early termination for several of its rig contracts, another U.S.-based drilling contractor is facing a similar faith.

Namely, Hercules Offshore has received a notice from Saudi Arabian oil company Saudi Aramco terminating its drilling contract for the Hercules 261 jack-up rig. The termination is expected to take place on March 27, 2015.

According to a February rig fleet status report by Hercules Offshore, the rig in question has a firm contract in Saudi Arabia until late-September 2019.

Commenting on the termination notice Hercules Offshore said: “The company is in the process of seeking a basis for continuing the Hercules 261 contract.”

Hercules Offshore also provided an update on two other rigs currently on contract with the Saudi oil giant:

“As previously disclosed, the Company has been in discussions with Saudi Aramco about a possible rate reduction on the Hercules 262 and Hercules 266. The Company has not received a notice of termination from Saudi Aramco with respect to these rigs.”

Another major drilling contractor, Seadrill, today said it is ready to renegotiate its current contracts terms with clients, possibly reducing its rigs day rates.

Oil companies are looking to reduce capital expenditure amid low oil prices, and additionally pressured by many new rigs entering the markets, drilling contractors are forced to reduce prices of their services. As Odfjell Drilling put it yesterday, there is a fierce competition when it comes to securing new contracts for offshore drilling rigs these days.

Offshore Energy Today Staff