- Offshore drillers have not needed to worry too much about cancellations in the Gulf of Mexico, but that no longer looks true after BP canceled contracts (I, II) on rigs owned by Ensco (ESV -1.2%) and Seadrill Partners (SDLP -2.6%).
- For 365 days lost, ESV will receive a hefty $160M termination fee, or ~78% of total possible revenues, while SDLP will get $160M for almost 800 days lost - solid fees, especially for ESV, but BP’s desire to cancel the contracts in spite of having to pay high fees shows the lack of work to be done in the Gulf, Raymond James says.
- The firm had believed the deepwater Gulf would be relatively strong as prior in-place contracts would have led to a flat Y/Y rig count - relatively strong in the current environment - but the BP cancellations show the region is not immune.