UK oil and gas firm, Tullow Oil has terminated the drilling contract with Maersk Drilling for the Maersk Venturer drillship in Ghana.
Maersk Drilling said it had received a notification from Tullow Ghana “of early termination for convenience of the drilling contract.”
The Maersk Venturer drillship has worked for Tullow offshore Ghana since February 2018, with an expected end of the contract in February 2022.
The rig is now expected to end the contract in June 2020.
“As a consequence of the termination, Maersk Drilling’s revenue contract backlog is reduced by USD 175m covering the period from the end of the contract to February 2022,” Maersk Drilling said.
“Subject to commercial prospects, Maersk Drilling will take measures to reduce Maersk Venturer’s operating costs following the end of the contract,” the company said.
Confirming the latest development to energynewsafrica.com, Head of Communications at Tullow Oil Plc George Cazenove, said “I can confirm we have terminated this contract. This is due to prevailing market conditions within the industry.”
The Danish offshore drilling company a couple of days ago issued an update on the impact of COVID-19 and lower oil prices on its business, warning that the situation “is assessed to have implications for the commercial and operational assumptions underlying the financial forecasts for the remaining part of 2020.”
“The lower oil price environment is likely to impact offshore activity with delays or cancellations of existing tenders and postponement of sanctioning of new projects adversely impacting the prospects for new contracts,” Maersk Drilling said on March 20.
The company thus revised down its financial guidance for 2020 for EBITDA before special items to USD 325-375m (original guidance of USD 400-450m). The guidance for capital expenditures remained unchanged at USD 150-200m.
“The severity and duration of the COVID-19 situation and the lower oil price environment are currently difficult to predict, but given the strong balance sheet, high liquidity reserve, and long debt maturity profile, Maersk Drilling has the financial strength and flexibility to withstand and navigate in this challenging business environment, also in case of a prolonged period of uncertainty,” the company assured.
At the end of 2019, Maersk Drilling’s net debt amounted to USD 1.1 billion corresponding to a leverage ratio of 2.6x, and the liquidity reserves amounted to USD 710 million, including an undrawn revolving credit facility of USD 400 million.
The loan facilities have final maturities in 2023 and 2025. Maersk Drilling complies with all financial covenants with a significant headroom and has no newbuilding capital commitments, the company said last Friday.