Exxon Mobil Corporation (XOM - Free Report) – a leading integrated energy player – has terminated a contract for Seadrill Partners LLC’s West Capella drillship. It is to be noted that West Capella is among the most rewarding drilling units of the offshore drilling player and was hired for working at Usan offshore field located in the Gulf of Guinea.
This drillship suspension news is quite normal in this unfavorable business environment. Although presently there is upward momentum in crude prices, the commodity has seen weak trading for a length of time. Following the pricing scenario, the upstream companies are not getting incentives for investing in exploration and production operations as they are not been able to sell the commodities at attractive prices. So, they are hiring fewer rigs for drilling activities which is leading to early drillship contract termination. Transocean Ltd. (RIG - Free Report) – the world’s largest offshore drilling contractor – has also faced several rig contract terminations like Seadrill Partners.
Investors should know that Seadrill Partners will get compensated with almost $125 million along with other direct costs for the premature drillship contract termination. Exxon Mobil will pay $125 million in two equal installments. The first one is expected by the second quarter of this year and the second is anticipated by the first quarter of next year.
During the idle time, West Capella drillship will likely be in Tenerife but for the fresh contract the rig is being marketed presently.
Irving, TX-based ExxonMobil is the world’s largest publicly traded oil company, engaged in oil and natural gas exploration and production, petroleum products refining and marketing, chemicals manufacture, and other energy-related businesses. Seadrill Partners – headquartered in London and was formed by SeaDrill Limited (SDRL - Free Report) – is an offshore drilling contractor.
Presently, Exxon Mobil carries a Zacks Rank #3 (Hold) while Seadrill Partners has Zacks Rank #2 (Buy).
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