Ocean Rig UDW Inc. has officially announced that two of its drilling contracts have been terminated, one of them in the Falkland Islands where its Eirik Raude was working for Premier Oil as the main operator. Ocean Rig is demanding a termination fee of several million dollars and in case Premier Oil contests the payment, we intend to commence arbitration proceedings.
Specifically, TOTAL E&P Congo on February 11, 2016 has given notification to terminate for convenience the long-term contract of the 7th generation ultra-deepwater drillship Ocean Rig Apollo. As per the contract Ocean Rig is entitled to a termination fee that varies from 50% to 95% of the operating daily rate that will be payable over the balance of the contract.
The Ocean Rig Apollo will demobilize from Congo in due course and is available for alternative employment. In connection with the termination of the drilling contract of the Ocean Rig Apollo, the Company has notified the agent under the respective loan agreement and is currently in discussions with its lenders about the consequences of such termination.
In addition, Premier Oil Plc. on February 12, 2016 has terminated the contract for the ultra-deepwater semisubmersible drilling rig the Eirik Raude operating in the Falkland Islands.
Ocean Rig has accepted Premier Oil Plc.'s termination for convenience and is entitled to a termination fee of up to $62.9m. In case Premier Oil Plc. contests the payment of such fee we intend to commence arbitration proceedings without any further notice. The Eirik Raude will demobilize from the Falkland Islands in due course and is available for alternative employment.
George Economou, Chairman and CEO commented: 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.