Pemex cancels contract for Seadrill’s West Pegasus semisubmersible

HAMILTON, Bermuda -- Seadrill has received a notice of termination from Pemex Exploracion y Servicios for the West Pegasus drilling contract effective Aug. 16. Seadrill has disputed the grounds for termination and is reviewing its legal options, the company said in a statement announcing the cancellation.

During the second quarter of 2015, Seadrill signed a provisional commitment for a two-year extension to the contract with Pemex for the West Pegasus. In conjunction with the extension, the day rate for the remaining term of the initial contract was reduced. The extension of the contract was finalized during the first quarter of 2016.

As part of this agreement, Seadrill and Seamex Limited, Seadrill’s 50% owned joint venture with Fintech, agreed to reduce the day rate on five jackups for a period of 365 days. The agreement to reduce the day rates of the existing contracts was contingent upon final confirmation of the two-year extension of the West Pegasus by Pemex management.

According to Seadrill, in the event of termination, Seadrill and Seamex are entitled to recover the day rate concessions as well as the demobilization for the West Pegasus. In addition, Seadrill will seek reimbursement of certain costs incurred in anticipation of the extension.