Naga 7 Contract Terminated As Result Of Total Loss Incident

Naga 7 Contract Terminated As Result Of Total Loss Incident
Contract for the NAGA 7 jack-up rig considered terminated following an incident earlier this year that sunk the rig.

A contract between Velesto Drilling and ConocoPhillips for the NAGA 7 jack-up rig is now considered terminated due to an incident earlier this year that tilted and submerged the rig.

To remind, ConocoPhillips hired the NAGA 7 in March 2021 for a value of about $8 million. It was supposed to drill up to three wells off Sarawak. While working on its assignment on May 3, the rig tilted and submerged due to rapid penetration into the formation resulting in a total loss of the asset.

All personnel onboard were safely rescued and were transferred to shore. At the time, Velesto said that no drilling activities were underway and no well had been drilled.

Later, Velesto said that the rig was covered by insurance and that the financial impact of the incident would be mitigated by the insurance. The company also issued a notice of abandonment for the sunken rig to its insurers.

In a statement from last week, Velesto Drilling said that its insurance underwriters confirmed on August 9, 2021, that NAGA 7 is a constructive total loss.

Under the terms of the contract, in the event Velesto Drilling’s underwriters consider the rig to be a total loss (including a constructive total loss), the contract is considered terminated without notice as from the moment that the loss occurred.

With the termination of the contract, the earnings of the Velesto Energy Group for the financial period ending December 31, 2021, will be reduced by the value of the ConocoPhillips contract.

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