Beach Energy, Diamond Offshore Settle Dispute over Ocean Onyx Rig Deal. Sign New Contract

Australian oil company Beach Energy has signed a new contract with drilling company Diamond Offshore for the use of the Ocean Onyx semi-submersible drilling rig.

The news comes after Beach in April terminated the previously signed contract for the rig, citing delays in the rig's arrival. Diamond Offshore then sued Beach Energy for unlawful termination.

Beach Energy on Monday said that the parties executed a new offshore drilling agreement for the use of the Ocean Onyx Semi-submersible rig to undertake Beach’s Victorian Otway offshore drilling program.

The agreement provides for the drilling of up to 9 wells (6 firm and 3 options), with drilling operations expected to start between December 2020 and March 2021.

The previous contract, terminated by Beach, was for 6 wells + 5 option wells and was supposed to start mid-Apr 2020 and run until 2Q 2021.

Under the new agreement, the first well in the drilling sequence is expected to be the Artisan 1 exploration well, followed by a series of development wells in the Geographe and Thylacine gas fields. 

"The agreement, which is at a globally competitive rig rate for deepwater semi-submersible rigs, includes provisions for COVID-19 related costs and delays," Beach Energy said. Norwegian rig broking company Bassoe Offshore has estimated the day rate to be around $220000.

In parallel with signing the contract, Beach Energy and Diamond Offshore have also signed a settlement agreement, which dismisses all current legal proceedings regarding the termination of the previous drilling agreement.

Beach Managing Director and CEO Matt Kay said “We are pleased to constructively engage with Diamond and sign a new drilling agreement, in what has been a difficult time for the industry. It means Beach can move forward with its plans to develop additional natural gas supplies for the east coast gas market.” 

"We look forward to working closely with Diamond over the coming weeks to prepare for the start-up of the offshore drilling campaign."

Worth reminding, Diamond Offshore in April filed voluntary petitions for reorganization under chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas. Despite this, the company at the time said its clients and vendors should expect business as usual.