Gulf Permitting Delay Prompts Marathon to Seek Rig Contract's End

A subsidiary of Noble Corporation has received notice from Marathon Oil Company seeking to cancel its contract for the ultra-deepwater semisubmersible Noble Jim Day if the rig does not commence operations by Dec. 31, 2010.

Marathon attributed its decision to try and end the contract to the failure of the U.S. Department of the Interior to finalize deepwater drilling and spill response regulations. Marathon has the right to terminate the contract if operations do not begin by Dec. 31, and considers the Department’s decision to withhold new deepwater drilling permits to be a force majeure event.

Noble Jim Day arrived in the U.S. Gulf of Mexico on Sept. 24 from Jurong Shipyard in Singapore to begin its final acceptance process for Marathon. Noble said it would work diligently with Marathon to complete acceptance testing and believes the rig is materially complete. The company said it also believes Marathon should fulfill its contractual obligation to accept the rig prior to Dec. 31, but is considering alternative operational opportunities for the rig in the event Marathon attempts to reject the rig.

Noble Chief Financial Officer Tom Mitchell said the announcement by Marathon seeking to cancel the rig contract came as a surprise. While Mitchell could not offer any more details to attendees at the Jefferies 2010 Global Energy Conference in Houston today, he noted that the company had a strong backlog of rig contract work.

Marathon and Noble signed the contract for the Noble Jim Day in March 2007 at day rate in the mid-$510s. The contract has a four-year term. Noble Jim Day is rated to work in water depths up to 12,000 feet and has a rated drilling depth capacity of 37,000 feet.


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