Offshore Drilling Companies Announce More Contract Cancellations

Maersk Drilling has joined the growing number of offshore rig operators experiencing contract cancellations due to the recent drop in oil prices. On Thursday, it announced that two clients have given notice of early termination for its rigs. 

BG International, a subsidiary of Shell, has terminated the contract for the semi-submersible Mærsk Developer with immediate effect. The original end of contract was expected to be in August 2020.

Aker BP has also terminated the contract for the jack-up rig Maersk Reacher, which was hired for accommodation services on the Valhall field, with effect from end-April 2020. The original end of contract was expected to be in October 2020.

For both contracts, Maersk Drilling expects to receive compensation in the form of early termination fees, so the financial impact is expected to be small. 

Competitor Noble Corporation has also announced delays and cancellations, including changes related to its contract with ExxonMobil for E&P work off Guyana, one of the largest new offshore exploration regions. Its drillship Noble Tom Madden has been put on standby for three months and its day rate cut by half. The planned addition of the Noble Sam Croft to the region has been canceled. In addition, Exxon has put the Noble Tom Prosser (deployed to Australia) on standby for up to a year and cut its day rate down to about $50,000.

Borr Drilling has also been affected by Exxon's cutbacks. Its rigs Groa and Gerd - deployed off Nigeria - have received early termination notices for contracts that were slated to end next year. 

When looking at all contractors and assets, about six rig-years worth of contract time has been canceled worldwide since the start of the COVID-19 downturn, according to Rystad Energy. In an echo of the oil market downturn of 2015-16, the consultancy expects that this trend will continue and that drilling contractors could lose about 10 percent of their expected 2020-21 contracts to cancellations.