Offshore drilling contractor Valaris has been hit with a slew of contract terminations, and dayrate and term reductions, its rig quarterly fleet status update released on Wednesday shows.
The news of contract terminations comes as no surprise, as low oil prices and COVID-19 have seen exploration and production companies cut their drilling budgets and delay projects, leading to multiple rig contract terminations across the offshore drilling sector.
While it is safe to assume that the market situation is behind contract cancellations, Valaris' contract for the DS-8 drillship with Total, at a dayrate $620,000, was terminated in late March instead of November 2020, after the company accidentally dropped a Blowout Preventer offshore Angola.
As for the other terminations, dayrate cuts, and stacking candidates see below the long list as shared by Valaris this week. DS stands for drillship, JU for jack-up rigs.
• VALARIS JU-109 contract, which was scheduled to be completed in July 2021, was early terminated and ended in mid April 2020
• VALARIS DS-7 contract for operations offshore Ghana from April 2020 to mid-May 2020 has been terminated
• VALARIS 5004 operated on a reduced day rate from mid-March 2020 to mid-April 2020, at which point the contract was terminated
• VALARIS JU-249 (Gorilla VII) ended its contract with Chrysaor in early April 2020
• VALARIS DS-16 (Resolute) expected to end its contract with Fieldwood in late June 2020
• VALARIS 8503 expected to end its contract with Kosmos in late April 2020
• VALARIS JU-100 expected to end its contract with DNO in late April 2020 • VALARIS DS-10 expected to operate on a reduced day rate from late April 2020 to mid-July 2020
• VALARIS JU-120 expected to operate on a reduced day rate from late April 2020 to late September 2020 • VALARIS JU-92 expected to operate on a reduced day rate from mid-May 2020 to late September 2020
• VALARIS JU-72 expected to operate on a reduced day rate from April 2020 to July 2020
• VALARIS DS-4, VALARIS DS-11, VALARIS DS-17 & VALARIS 8504 are in the process of being preservation stacked
New deals
Apart from contract terminations, Valaris has shared it has secured a few contracts and contract extensions, as well. See below for details:
VALARIS MS-1 awarded a three-well contract with Santos offshore Australia that is expected to start in first quarter 2021, with an estimated duration of 155 days
VALARIS 8505 awarded a one-well contract with Lukoil Upstream Mexico that is expected to commence in mid-November, with an estimated duration of 80 days Jackups
VALARIS JU-118 (Joe Douglas) awarded a three-well contract with Fieldwood offshore Mexico that commenced in mid-March, with an estimated duration of 425 days
VALARIS JU-144 (EXL II) awarded a two-well contract with Fieldwood offshore Mexico that is expected to commence in May, with an estimated duration of 200 days; contract previously announced with ENI offshore Mexico expected to commence in September 2020 transferred to VALARIS JU-102
VALARIS JU-87 awarded a one-well contract with Cox in the U.S. Gulf of Mexico, with an estimated duration of 30 days from March 2020 to April 2020, and then extended to May 2020 for another well with an estimated duration of 30 days
Worth noting, Reuters has this week reported that Valaris, the world's largest offshore driller by fleet size, is reportedly looking to start talks with creditors to over terms of a possible bankruptcy filing.
Valaris, formed last year through the merger of Ensco and Rowan Companies, plans to attempt negotiations with creditors to gain support for a restructuring plan before a bankruptcy filing, sources told Reuters.