Petrolia Drilling Loses Petrobras Contract
Petrolia Drilling ASA shares dropped 23 percent after news that the company may run out of cash after Petrobras canceled the contract for the Valentin Shashin. The company said it plans to contest the cancellation.
"The company is very dependent on the cash flow from this rig," said Tom Arboll, an analyst at Gjensidige Nor Equities in Oslo, who rates the stock "underperform." While the cancellation presents "a danger of" bankruptcy, "the banks will probably give them some time to turn around if possible," he added.
Petrolia's stock has lost more than two-thirds of its value in the past year. The company's fourth-quarter operating loss swelled to 15.6 million kroner ($1.8 million), hurt by falling sales and costs related to repairs on its three vessels. Valentin Shashin has a day rate of $69,000, Petrolia said on its Website. "The cancellation came as a complete surprise to us and we don't think it's legal," Petrolia Chief Executive Officer Lars Moldestad said. "Petrobras hasn't given us a good reason for canceling and we'll need to hold talks with them."
The contract was canceled after Valentin Shashin was shut down for 20 days from March 25 to repair damage to its derrick. The Brazilian company didn't give a detailed reason for the cancellation, though it referred to contract regulations for how long the vessel may be shut down for repair, Moldestad said. Valentin Shashin is under contract with Petrobras until February.
"If Petrobras upholds its cancellation, the company will hold Petrobras responsible for any financial losses it may suffer," Petrolia said.