- Offshore drillers were pounded yesterday after Diamond Offshore (DO -1.8%) disclosed that Petrobras and Pemex had notified of their intent to cancel some rig contracts, but Jefferies analysts think the cancellations are a negotiating tactic being used by national oil companies.
- The cancellations could be national oil companies' attempts to set examples in an attempt to instill fear, Jefferies says, as it foresees some more cancellations but mostly for contracts to be renegotiated lower, causing some estimate risk but not as dramatic as DO’s news.
- If the DO floater cancellations are executed, the number of floaters on hire by Pemex would go to four from seven, suggesting little Pemex floater risk is left, the firm says; Paragon Offshore (PGN -3.8%) has only three of its 11 rigs in the region contracted beyond early-May, so the risk is more that the rigs go idle than contract cancellations, and Seadrill's (SDRL +1.6%) five jackups might be excluded from the typical contract terms given it formed a JV with Pemex.