Maersk Drilling announced on Thursday that it has received notice of early termination for convenience of two of its drilling contracts.
“BG International Ltd., a subsidiary of Shell, has terminated the contract for the semi-submersible Mærsk Developer with immediate effect. The original end of contract was expected to be in August 2020,” according to a statement from Maersk Drilling.
The second notice came from Aker BP, which has terminated the contract for the jack-up rig Maersk Reacher, which was hired for accommodation services on the Valhall field, with effect from the end of April 2020. “The original end of contract was expected to be in October 2020,” the release said.
For both contracts, Maersk Drilling expects to receive compensation in the form of early termination fees. “Accordingly, the financial impact of the contract terminations on profitability in 2020 is expected to be limited,” the release said.
The oil price war between Russia and Saudi Arabia which led to low oil prices coupled with the worldwide novel coronavirus outbreak and the related restrictions on movement caused a number of E&P companies along with well technology and oilfield service companies to slash budgets by as much as 30%.
Further, the coronavirus pandemic has led to a reduction in demand for petroleum products in many markets putting more pressure on the companies’ projected earnings.
As a result of the budget cuts, rig companies like Maersk Drilling, Noble Corporation and others continue to feel the fallout from cancelled or truncated projects.
Maersk Drilling, a Danish company and part of the Maersk group, operates a fleet comprised of four drill ships, in addition to a number of jack-up rigs and semi-submersibles.