Australian oil and gas company Beach Energy has terminated the contract for Diamond Offshore's Ocean Onyx semi-submersible drilling rig, citing delays in the rig's arrival.
The rig was to be used by Beach Energy at the Victorian Otway Basin, however, the company on Monday said it had issued the Ocean Onyx rig
operator Diamond Offshore Drilling Inc. with a notice of termination for the Ocean Onyx rig contract.
"The semi-submersible Ocean Onyx rig arrived in Victorian state waters in mid-April for commencement of the Victorian Otway Basin offshore drilling campaign. As the arrival date was later than had been agreed and specified in the rig contract, Beach exercised its right to terminate the agreement," Beach Energy explained.
The rig had not yet been accepted by Beach and therefore whilst some preliminary start-up costs have been incurred, the company’s spend to date is not material, Beach said.
Talks underway for new contract
"Beach has a good working relationship with Diamond and its other service providers. All parties are engaging in discussions with regard to the future operations of the Ocean Onyx rig and the Victorian Otway Basin offshore drilling campaign, with a view to agreeing a new contract in due course," Beach Energy said.
"This process will take into consideration executing the drilling campaign during the COVID-19 epidemic and associated restrictions. Beach’s preliminary assessment is that offshore drilling is unlikely to commence until FY21, with the exact timing to be agreed as part of any new contracting process," Beach Energy added.
Offshore drilling contractors have been hit hard in recent weeks. The combination of COVID-19 pandemic and low oil prices has lead the drillers' clients - oil companies - to cut exploration budgets and seek ways to terminate or cut short the drilling contracts in place.
Rystad Energy recently said offshore drilling contractors were set to lose contracts worth $3 billion in combined revenue in 2020 and 2021, citing the impact of the coronavirus pandemic and low oil prices.
The likes of Valaris, Maersk Drilling, Shelf Drilling, Borr Drilling, Noble Corp, Transocean, have all recently lost contracts, seen them cut short much earlier than expected, or received requests from clients to reduce day rates for rigs on contracts.