The deep dive in commodity prices has taken out another deepwater drilling contract.
Transocean Corp. confirmed Monday that Murphy Exploration & Production, a subsidiary of Murphy Oil Corp., had ended its November contract for the Discoverer Deep Seas (UDW drillship) early, electing instead to pay a lump-sum termination payment.
The cancellation comes two months after another offshore cancellation for Transocean. At the end of 2015, Royal Dutch Shell plc ended its contract for Transocean’s Polar Pioneer (mid-water semisub), prior to its July 2017 end date.
Analysts at Raymond James said the Murphy termination was expected, based on the company’s announcement in January it would cancel two Gulf of Mexico contracts – the Transocean drillship and one owned by Diamond Offshore. Similar to other deepwater operators, Murphy has cut its capital spending program for 2016. Cancelling the two contracts was expected to cost Murphy about $282 million.
Consequently, while the announcement was net neutral to Transocean’s backlog, analysts at Raymond James said, “It continues to demonstrate the lack of demand across the deepwater market.”
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