Atwood Oceanics Inc. said a unit of RWE AG is seeking to halt full payment for a rig off the coast of Egypt because of the civil unrest in the country.
As a result of the force majeure claim from the Egyptian arm of RWE AG, the Atwood Aurora rig will be rented for 70 percent of its current rate of $133,000 per day for 15 days, the Houston-based drilling contractor said today in a statement. After that, the rig will earn 50 percent of its normal rate until remediation or contract cancellation. The contract can be canceled by either side after 30 days.
Other rig owners operating offshore Egypt, such as Transocean Ltd. and Diamond Offshore Drilling Inc. may see similar results “in fairly quick succession,” said Judson Bailey, an analyst at Jefferies & Co. in Houston, who rates Atwood at a hold and owns none.
“Egypt is not a huge offshore market, but it does have very good growth opportunities,” Bailey said. “That was a market that you were probably poised to see some nice gas-driven demand.”
Transocean, the Vernier, Switzerland-based company that has the world’s largest fleet of offshore drilling rigs, has five vessels operating in Egyptian waters, including the Discoverer Americas, which is under lease to Statoil ASA for $486,000 a day. Transocean has five rigs idle in Egyptian shipyards undergoing repairs or waiting for new customers.
Monitoring the Situation
Diamond Offshore, based in Houston has three rigs off the coast of Egypt, including the deep-water Ocean Endeavor, which is working for a rate of about $220,000 a day, according to the company. The rig was relocated last year out of the Gulf of Mexico, where most deep-water drilling has been suspended after a BP Plc oil spill last year led the U.S. to review drilling regulations.
“We’re continuing to monitor the situation,” Les Van Dyke, a spokesman for Diamond Offshore, said today in a telephone interview.
Protests against Egyptian President Hosni Mubarak continued for a seventh day.
There are currently 21 offshore rigs working in Egypt, including seven in the Gulf of Suez and the rest in the Mediterranean, Waqar Syed, an analyst at Macquarie Capital Usa Ltd. in Denver, wrote today in a note to clients.
If the contract for Atwood’s rig is canceled, the contractor would be able to find another job quickly, meaning there may not be a long-term impact, according to Syed. With the market for high-specification shallow-water rigs like the Atwood Aurora remaining relatively robust, “it is possible that its next contract could be in line or even higher than the current dayrate.”