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Transocean, Shell delay delivery of two new drillships

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Screen Shot 2015-09-17 at 07.55.40By Rhiannon MeyersOctober 26, 2015

Transocean and Royal Dutch Shell struck an agreement to delay the delivery of two new ultradeep-water drillships as the offshore drilling industry cools amid a global downturn in oil prices.

The Swiss-based offshore drilling contractor announced early Monday that it would push back the operating and delivery contracts of the Deepwater Pontus and Deepwater Poseidon by one year each.

Drillships are used to hunt for new oil and gas in waters deep offshore. With oil prices refusing to budge above $50 a barrel for months, oil companies have throttled expensive offshore exploration projects as they wait for crude to rebound.

The delay will not affect the duration or day rate of the original 10-year operating contracts on each ship, Transocean said. While the company did not provide specifics of the contract terms, investment banking firm Simmons & Co. said the ships’ rates are $519,000 per day.

The agreement will also not impact two other ultradeep-water drillships contracted by Shell, Transocean said. The Deepwater Thalassa was delivered in September while the Deepwater Proteus is scheduled to be delivered in December.

“We are excited about the progress that we have jointly made with Shell on all four high-specification, ultradeep-water drillships,” Transocean President and CEO Jeremy Thigpen said in a statement.

The news provided some optimism for the battered industry, since multinational oil giant Shell, one of the world’s leading global deepwater operators, has still agreed to contract the rigs, despite the tough environment, analysts at investment banking firm Tudor, Pickering, Holt & Co. said in a note to investors Monday.

The decision also provides some immediate financial relief for Transocean, which still has more than $1 billion in remaining payments on the two rigs, Simmons & Co. analysts said. The delay gives the company more time to pay off those capital expenditures, boosting Transocean’s near-term liquidity.

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