SHI Agrees to an 18-Month Delay in Delivery of Drillship to Ocean Rig

Samsung Heavy Industries (SHI) agreed to delay delivery of an ultra deepwater drillship to Ocean Rig UDW Inc. by 18 months to June 30, 2017, the South Korean shipyard said in a filing on the Korea Exchange Friday.

Under the revised contract for the drillship, believed to be Ocean Rig Santorini (UDW drillship), SHI will raise the contract price to $599.1 million (KRW 709.3 billion), up from $515.5 million (KRW 610.3 billion) in the original deal. The drilllship was originally due to be delivered in December 2015.

Ocean Rig indicated earlier this month in a company presentation that it expected the Ocean Santorini drillship to be delivered in the second quarter of 2016. The drillship has not secured a contract so far as demand for rigs has been adversely affected by the prolonged downturn in global oil prices following a cutback in capital expenditure by oil and gas operators worldwide.

“We still believe in the long-term market recovery and in the solid fundamentals of our industry but currently the market remains challenging and we are in the midst of a significant downturn in offshore drilling. The recent volatility in the price of oil and increased availability of drilling units, do not allow for a short-term market improvement," Ocean Rig Chairman and CEO George Economou said Aug. 6 when the company released its financial report for the second quarter.

The drilling contractor has two more rigs, Ocean Rig Crete (UDW drillship) and Ocean Rig Amorgos (UDW drillship), under construction at SHI yard in South Korea, with deliveries targeted for the first quarter of 2018 and the first quarter of 2019, respectively.

Global oil prices have fallen by more than 50 percent from a year ago due to an oversupplied market. On Friday, U.S. light crude oil futures settled at $44.63 a barrel and global benchmark Brent at $48.59 a barrel.


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