Rig contract pulled early for Transocean

Company takes second loss for the month a day before the release of quarterly earnings.
By Daniel J. Graeber  |  Feb. 24, 2016 at 6:51 AM
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ZUG, Switzerland, Feb. 24 (UPI) -- For the second time this month, rig company Transocean said one of its clients announced it was canceling a contract for deep-water activity early.

Transocean said Esso Exploration Angola Ltd., a subsidiary of Exxon Mobil that works on behalf of state energy companies, canceled its contract for the ultra-deepwater GSF Development Driller I rig.

"The rig's drilling contract is expected to end in May 2016 with the demobilization completed in June 2016," Transocean said in a statement. "In accordance with the terms of this contract, the company will not receive a payment compensating it for the remaining contract term."

The rig entered into service in 2005 and was designed to operate in waters as deep as 7,500 feet. The rig was last listed as having a day-rate of $367,000.

Lower crude oil prices leaves energy companies with less capital to invest in exploration and production activity, a trend characterized by declining rig counts. Baker Hughes, a company that provides services for companies working in that sector, reported a January international rig count of 1,045, a decline of 50 from December and lower than January 2015 by 213.

Exxon's lease for the deepwater drilling started in June, when crude oil prices were around $61 per barrel for Brent. Brent traded early Wednesday at around $32 per barrel.

Murphy Oil Corp. told Transocean in early February it was cancelling a contract slated to run through November early. The company was leasing the Discoverer Deep Seas rig in the Gulf of Mexico from Transocean at a rate of $604,000 per day.

Transocean is scheduled to release its quarterly earnings report Thursday.

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