Saudi Aramco revisits rig contracts

HOUSTON, June 1 (UPI) -- U.S. rig company Hercules Offshore said Monday its clients in Saudi Arabia withdrew a notice to terminate a contract for its services.

Hercules said Saudi Aramco withdrew its notice of termination for rig Hercules 261, "declaring that all terms and conditions of the contract remain in full force and effect for the remainder of the five-year term of the contract."

Hercules in February said it was engaged in talks with the Saudi oil company to reduce the day rates for two other rigs, Hercules 262 and Hercules 266, when the contract was suspended.

Hercules 261 is listed in the company's fleet status update as having a day rate around $135,000. Rigs 262 and 266 have a combined average day rate of around $118,000.

"Notwithstanding the receipt of the withdrawal of the termination notice for the Hercules 261, the day rates on this rig, the Hercules 262 and the Hercules 266, which are also under contract with Saudi Aramco, are expected to be significantly reduced to bring such day rates in line with current market rates for similarly classed rigs in the region," the rig company said in a statement.

The February suspension came as crude oil prices were plummeting in response to a decision from the Organization of Petroleum Exporting Countries to keep production steady despite a weakened market. Oil prices have since recovered, though Brent crude oil prices are up just 6 percent from February levels.

Hercules posted a first quarter net loss of $57.1 million, compared to net income of $19.9 million during the first quarter of 2014. In its quarterly report, the company said it expected the demand for offshore rigs would remain low for the year with few signs of recovery in the current oil price market.