Norwegian oil and gas company Equinor has terminated a $428 million drilling contract with drilling firm Valaris for the Valaris DS-11 drillship.
The drillship, stacked in Las Palmas, Spain, was supposed to start the contract in July 2024 and stay on the contract until December 2027.
To remind, Valaris had said in April that the Valaris DS-11 (ex-Atwood Advantage/Ensco DS-11) drillship deal for an eight-well contract for a deepwater project in the U.S. Gulf of Mexico had been novated from TotalEnergies to Equinor.
Valaris said at the time there were no material changes to the contract resulting from the novation, including with respect to the termination provisions in the event the project does not receive a final investment decision (FID).
While Valaris did not share further details on this project, it is likely that this is related to the North Platte project in the U.S. Gulf of Mexico from which TotalEnergies decided to withdraw in February.
In an update on June 1, Valaris said that Equinor had delivered a termination notice for the drilling contract. The termination will take effect at the end of June.
"Our total contract backlog of $2.5 billion as of May 2, 2022, included approximately $428 million related to this contract,” Valaris said.
"As a result of the contract termination, Valaris will receive an early termination fee that is more than sufficient to cover expenses and commitments incurred by Valaris on the project,” Valaris said, without sharing details on the termination fee amount.
President and Chief Executive Officer Anton Dibowitz said, "While we are disappointed that this contract has been terminated, the floater market and day rates have improved meaningfully since this contract was entered into in July 2021, and we expect there will be other attractive projects for a high specification drillship like Valaris DS-11 with similar or earlier commencement dates."
Committed to progress North Platte
An Equinor spokesperson said: "As you know, we took over the operatorship and some contracts when TotalEnergies pulled out [from the North Platte project]. What I can say is that we are committed to progress the North Platte project, but unfortunately I can’t give any details at this time."
The North Platte is a Paleogene oil discovery covering four blocks in the Garden Banks area in the Gulf of Mexico. It is located 275 kilometers off the coast of Louisiana in water over 1,300 meters deep. The North Platte discovery had been a part of the Cobalt International Energy portfolio, a company that went bankrupt in 2017. Total and Equinor (then Statoil) acquired Cobalt's interest in April 2018.
TotalEnergies had planned to develop the project using a semi-submersible floating production unit, with the development expected to produce 75,000 barrels of oil per day at plateau. The North Platte field straddles four blocks of the Garden Banks area. According to info shared previously by TotalEnergies, the reservoir is of high quality, both in porosity and permeability, with thickness in places exceeding 1,200 meters.