HAMILTON, Bermuda- Seadrill Ltd. has canceled its contract with Hyundai Heavy Industries Co. Ltd. that for the construction of West Mira, a sixth-generation ultra-deepwater harsh environment semisubmersible drilling unit.
Ordered during 2Q 2012, Seadrill said that the contract stipulated that the unit was to be delivered by Dec. 31, 2014. Due to the shipyard's inability to deliver the unit within the timeframe required under the contract, the company has exercised its cancellation rights, it said in its statement.
Under the contract terms, Seadrill has the ability to recoup the $168 million in pre-delivery installments to the shipyard, plus accrued interest.
In 4Q 2012, Seadrill was awarded a five-year contract for West Mira with Husky Oil Operations Ltd. for operations in Canada and Greenland. Due to the late delivery of the unit, the company had tentatively agreed with Husky to reduce the dayrate of West Mira drilling contract.
SeaSeadrill stated during its 2Q 15 earnings call that it would not take delivery of [West Mira] if it does not have a satisfactory contract with Husky and financing to go along with it, Evercore ISI Senior Managing Director & Partner James West said, noting that the semisub was priced at $650 million.
“West Mira was ordered on May 4, 2012 for Oct.1, 2014 delivery, but was most recently scheduled for delivery on Aug .24, 2015,” West continued. “The rig was in the middle of sea trials as of late August and marks the second newbuild floater canceled by an established contractor thus far.”
Seadrill says it remains in discussions with Husky to find an alternative solution to meet its drilling requirements.
“Seadrill indicated it had tentatively agreed with Husky to reduce the dayrate on the West Mira contract due to the late delivery of the unit from the yard, and $450 million was realistic leverage on the rig,” West said. “[Evercore] believes Seadrill is likely to substitute the West Mira with the West Eminence or North Atlantic Drilling Co.'s West Rigel, both of which are similar Moss Maritime CS-50 MkII designs with the Eminence available in the Canary Islands, while the West Rigel is on standby in Singapore.”