Ocean Rig delays newbuilds, seeks financial advice

August 12, 2016

Rig operator Ocean Rig has agreed to delay the delivery of the first two of three new rigs it is having built by Samsung Heavy Industries. The firm is also assessing its future financial viability amid a "grossly oversupplied market," which is expected to worsen.

The rig delivery delays will result in "re-scheduling" payments and Ocean Rig said it had also agreed an amendment to the contract price.

But, in a market the firm thinks is set to be depressed for some time to come, the firm said it needed to assess options around its finances, which could include restructuring under US Bankruptcy laws. The ultra-deepwater focused firm has 11 rigs, comprising two semisubmersibles and nine drillship. Five of its rigs are cold stacked or due to be cold stacked. It also has three drillships being built: Ocean Rig Santorini, Ocean Rig Crete and Ocean Rig Amorgos. 

Ocean Rig's CEO and chairman George Economou said: “Despite the continued positive operational performance of the company (fleet utilization for Q2 the second quarter of 96.3%) the market conditions remain extremely negative. Oil companies continue to reduce their offshore budgets and as more floaters come off contract in the next six months, an already grossly oversupplied market is expected to worsen. 

"In this current and anticipated poor market environment which we expect to persist for an extended period of time, we believe it is prudent to focus on maintaining liquidity and de-levering the company."

He said the consensus view was that "a recovery may not occur for several years." Therefore the firm has taken on financial and legal advisors to assess the viability of its capital structure and what actions it can take.

"We continue to explore and consider alternatives, which may include a possible reorganization under US bankruptcy laws or another jurisdiction, so that we can ride out this very difficult cycle with feasible prospects for strong, long-term success,” he added.

Ocean Rig has six rigs, built between 2011 and 2014, currently active. In addition, the Eirik Raude, Ocean Rig Olympia, Oceann Rig Apollo and Ocean Rig Paros are currently cold stacked in Greece. Ocean Rig Mylos is also due to be cold-stacked in Greece. Ocean Rig's total backlog, as at August 10, is $2.2 billion.  

The Leiv Eiriksson semisubmersible has completed 15-year class survey and scheduled equipment and winterization upgrades related to its next contract, and on 18 July 2016 the mobilized to location in Norway to start work for Lundin Norway.

On 16 June, Ocean Rig reached an agreement with Repsol Sinopec to terminate the contract of the Ocean Rig Mylos, operating offshore Brazil, against full payment of the remaining backlog.

On 27 April, the firm reached an agreement with ENI to settle a dispute over the termination of the contract for the Ocean Rig Olympia against a total payment of $54 million and the extension by 81 days for the contract of the Ocean Rig Poseidon, at a daily gross operating rate of $115,000.

Image: THe Leiv Eiriksson. Image from Ocean Rig.



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