Seadrill is exercising its right to cancel the construction of the newbuild West Mira after Hyundai Heavy Industries failed to deliver the vessel on time.
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West Mira illustration. From Seadrill. |
Seadrill ordered the sixth generation ultra deepwater harsh environment semisubmersible drilling unit in 2Q 2012 with an expected deliver date of 31 December 2014.
“Due to the shipyard's inability to deliver the unit within the timeframe required under the contract, the company has exercised its cancellation rights,” Seadrill said.
According to Seadrill, the terms of the contract state that Seadrill has the ability to recoup the US$168 million in pre-delivery installments to Hyundai Heavy Industries, plus accrued interest.
The West Mira was already under a $1.18 billion five-year contract with Husky Oil Operation Ltd., signed in 4Q 2012, for operations in Canada and Greenland.
In Seadrill’s 2Q 2015 quarterly report, the company said that due to the late delivery of the vessel, the company had tentatively agreed with Husky to reduce the dayrate of the West Mira drilling contract. The two companies remain in discussions to find an alternative solution to meet its drilling requirements.
Seadrill has another harsh environment newbuild under construction, the West Rigel, which is of similar design as the West Mira. The semisubmersible is under construction at the Jurong Shipyard in Singapore. Originally set to delivered in 1Q 2015, the West Rigel is set to be available in August 2020, according to Seadrill.
The West Mira was to be designed for drilling in harsh environments and water depths up to 10,000ft. It was to be equipped with DP-3 (dynamic positioning) as well as 12-point mooring capability, potential for two six ram blowout preventers and along with 1000 ton load path capacity.
Seadrill's fleet status
Seadrill currently has 14 other rigs under construction: three drillships, three semisubmersibles, and eight jackups, according to the company’s 2Q report.
The West Draco and West Dorado drillships originally set for 3Q and 4Q 2015 deliveries are being delayed to 1Q 2017.
As of 2Q, Seadrill owns 19 floaters (drillships and semisubmersibles) of which 16 are in operation and two idle.
The eight jackups scheduled for delivery this year have also received amended delivery dates. One jackup is set for delivery at the end of December 2015, five jackups will be delivered in 2016, and the remaining two jackups have been pushed back until 2017. Seadrill is still negotiating with shipyards on the delivery dates for the remaining units. Of Seadrill’s 19 jackups, 17 are in operation and two are idle.
Based on the current level of activity, as of 2Q, Seadrill expects stacking and scrapping activity to continue through the rest of the year and well into 2016 based on the current level of activity in its ultra deepwater rig market.
“Scrapping activity has continued in the second quarter with an incremental 14 floaters designated for retirement. A total of 40 floaters have been now been scrapped since the end of 2013, equivalent to 12% of the total fleet, and currently there are 28 cold stacked units,” Seadrill said in its 2Q 2015 report. “We continue to believe that the significant cost to perform periodic classing activity on these older assets will ultimately drive decisions to cold stack and scrap these less capable units.”
The company’s orderbook stands at approximately 78 units, of which 29 are Sete newbuilds. Approximately 145 units, or 51% of the total marketed floater fleet are rolling off contracts between now and the end of 2017, many of which must undergo a 15- or 20-year classing.
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