New contract, combined with a $31M early termination fee, expected to generate $100M
Mikaila Adams
OGFJ, Associate Editor
In a move to keep its rigs employed, deepwater drilling contractor Diamond Offshore Drilling Inc. (NYSE: DO) will move the Ocean Endeavor from the Gulf of Mexico to Egypt.
A subsidiary of the company has entered into a term contract ending June 30, 2011, plus option, with Burullus Gas, a joint venture company established to cover the West Delta Deep Marine (WDDM) area offshore the Nile Delta. Burullus Gas is a joint operating company of Egyptian General Petroleum Corp. (50%), BG Group (25%) and Petronas (25%).
The new contract, combined with a $31 million early termination fee paid by the previous operator of the rig, is expected to generate combined maximum total revenue of approximately $100 million.
According to Diamond Offshore’s June 30 rig report, the deepwater semisubmersible was under a four-year contact by Oklahoma City-based Devon Energy Corp. with dayrates in the mid $290's. The contract went into effect in early July 2007 and was scheduled to be up for an unpriced option in late June 2011.
Diamond Offshore president and CEO, Larry Dickerson, noted, "With new contracting severely restricted in the GOM as a result of the uncertainties surrounding the offshore drilling moratorium, we are actively seeking international opportunities to keep our rigs fully employed. We greatly regret the loss of US jobs that will result from this rig relocation."
Additionally, the company has sold its 350-ft. high-specification jack-up Ocean Shield to Ensco plc. For $186 million. The rig is currently working under a term contract for Apache Corp. in Australia, which Ensco will assume.
