Ensco reported today that a subsidiary has terminated its contract for the ENSCO 69 jackup drilling rig with Petrosucre, a subsidiary of Petróleos de Venezuela S.A., the national oil company of Venezuela ("PDVSA"). Petrosucre, which has been operating ENSCO 69 since January 2009, has not returned the rig to Ensco and has notified the Company that it will continue to operate ENSCO 69.
As noted in Ensco's news release on May 11, 2009, Petrosucre has failed to pay past due invoices and Ensco submitted a notice of termination to Petrosucre, as permitted under the terms of the ENSCO 69 contract. The notice period has ended and the contract between Ensco and Petrosucre is now terminated. Ensco has removed all of its remaining employees from ENSCO 69.
As previously disclosed, Ensco has deferred revenue under the contract with Petrosucre since late January 2009, when Petrosucre took over drilling operations. Ensco's net receivable from Petrosucre is $16.9 million related to work performed prior to late January 2009, as previously disclosed in Ensco's first quarter 2009 SEC Form 10-Q. Ensco will likely fully reserve the $16.9 million net receivable and write off a $4.8 million deferred tax asset related to the prior write down of receivables. In total, this would reduce earnings by approximately $0.15 per diluted share in second quarter 2009.
As of March 31, 2009, ENSCO 69 had a net book value of $17.7 million and an insured value of $65 million under a package policy, including coverage for certain political risks, subject to a $10 million deductible. Ensco is pursuing an insurance claim under its package policy and is pursuing legal remedies for damages relating to ENSCO 69.
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