Freeport-McMoRan Oil & Gas LLC (FMOG) and its parent company Freeport-McMoRan Inc. have agreed with drilling contractor Noble Corp. PLC to cancel contracts for the Noble Sam Croft and Noble Tom Madden drillships.
Noble Sam Croft was scheduled to terminate in July 2017 and Noble Tom Madden in November 2017. The firms had been engaged in discussions since late last year about restructuring the contracts (OGJ Online, Dec. 18, 2015).
The rigs’ Gulf of Mexico operations will cease “as soon as practicable,” said Noble Corp., which will receive $540 million and potential further contingent payments from Freeport of $25 million and $50 million, respectively, depending upon the average price of oil over a 12-month period.
Noble Corp. said it also expects to realize more than $100 million in direct cost savings as a result of the contract terminations through crew reductions and stacking procedures.
Freeport recently announced a restructuring of its oil and gas business (OGJ Online, Apr. 6, 2016). As disclosed in Freeport’s public filings, FMOG has substantial debt and has been negatively impacted by the crash in oil prices.
“Given the financial headwinds facing our client, we are pleased to have resolved this matter in this manner,” said David W. Williams, Noble Corp. chairman, president, and chief executive officer.