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Transocean loses another rig contract early

Shell cancels contract for rig deployed this year in Arctic waters offshore Alaska.

By Daniel J. Graeber
Transocean loses another rig contract early
Transocean says Royal Dutch Shell cancels contract for Polar Pioneer rig early. Shell had contracted the rig for a controversial drilling program offshore Alaska. Photo courtesy of Greenpeace

ZUG, Switzerland, Dec. 28 (UPI) -- Rig company Transocean said Monday its contract for the Polar Pioneer rig, deployed offshore Alaska, was canceled early by Royal Dutch Shell.

The contract was set to expire in July. The rig company, which has headquarters in Switzerland, said it will be compensated for the early termination of the lease through an undisclosed lump sum.

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In its latest quarterly fleet status report, Transocean reported the Polar Pioneer rig had a day rate of $561,000 per day, about 10 percent less than the previous rate. The lump sum payment from Shell includes "adjustments for reduced operating costs and demobilization to Norway," Transocean said.

The cancellation for Transocean is the second so far in December. Norwegian energy company Statoil canceled its contract to lease the Discoverer Americas drillship, listed with a day rate of $590,000, a 19 percent reduction from the previous lease.

Lower crude oil prices are leaving energy companies with less capital to invest in exploration and production. Shell said in a prospectus published last week that capital investments for next year would be around or 5.7 percent lower than previously forecast.

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Shell said it would be at or near the break-even point after the merger if Brent crude oil is priced near $60 for next year, about 62 percent higher than the current level. The company had no statement on its decision to cancel its lease for Polar Pioneer.

Shell was proposing as many as six wells in a region known as the Burger prospect, located in shallow waters off the coast of Alaska, using the Noble Discoverer and Polar Pioneer rigs. The company in September said it found evidence of oil and natural gas in its Burger prospect, but not enough to warrant further activity.

Transocean in August canceled plans to issue stock dividends, citing the deterioration in the offshore drilling market. The company is now been delisted from the SIX Swiss Exchange.

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