Drilling contractor Ocean Rig CEO George Economou has warned that a recovery for the oil and gas industry might not come until 2018, at the earliest.
Economou's comments were made as the Greece-based firm announced its second rig cancellation in the space of days.
Total has served notice to terminate its long-term contract on the 7th generation ultra-deepwater drillship Ocean Rig Apollo, which had been working offshore Congom, West Africa.
The cancellation comes days after Premier Oil announced its was terminating with immediate effect its contract for the Eirik Raude semisubmersible drilling rig, following "operational issues."
Economou, who is also Ocean Rig's chairman, said: “It is really regrettable that two of our clients have decided to terminate drilling contracts for convenience. This is a reminder of the extremely challenging times facing the offshore drilling industry and oil companies taking unprecedented action to reduce their capital expenditures.
"The prospects for the industry remain bleak and we currently see limited prospects of a recovery before 2018 at the earliest.”
The company owns and operates 13 offshore ultra deepwater drilling units, comprising of two ultra deepwater semisubmersible drilling rigs and 11 ultra deepwater drillships, three of which are new builds scheduled for delivery in 2017-2019.
Predictions about when and if a recovery might happen vary wildly, with some suggesting prices will never again see the US$100/bbl levels seen up to 2014, pointing to the long-term trend for oil prices being around $40, while others, including BP, suggest $100/bbl spikes will be seen again.
Ocean Rig says it will recoup some costs on the contract terminations. It says it is entitled to a termination fee of between 50-95% of the operating daily rate, payable over the balance of the contract.
Ocean Rig also says it is entitled to a termination fee of up to $62.9 million on the Eirik Raude. However, there's a chance Premier Oil will contest this. Should this happen: "We intend to commence arbitration proceedings without any further notice," says Ocean Rig.
Ocean Rig has in the past said that it could scrap the Eirik Raude if it doesn't seek future work. The firm said today the rig will demobilize from the Falkland Islands in due course and is available for alternative employment.
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