Marathon ends contract for Noble's Jim Day semi
Marathon Oil Co. confirmed it cancelled its contract to lease the Jim Day deepwater semisubmersible from Noble Corp.
OGJ Senior Staff Writer
HOUSTON, Jan. 5 -- Marathon Oil Co. confirmed it cancelled its contract to lease the Jim Day deepwater semisubmersible from Noble Corp.
The news came more than 2 months after the Obama administration lifted its ban on drilling in the deepwater gulf following the Macondo well blowout. BP PLC operated Macondo.
Marathon said it remains committed to its exploration program in the gulf and worldwide. "Numerous options are available to access the necessary qualified drilling rigs," Marathon said in a email statement to OGJ.
Noble Chief Executive David W. Williams said his company was disappointed by Marathon's decision. “Fortunately, the Noble Jim Day is one of the most capable rigs in existence, and there are already a number of potential customers interested in a unit of this caliber,” Williams said.
In December 2010, Noble had said Marathon might terminate the contract if the semi was not ready for work in the gulf by yearend. The semi can drill in 12,000 ft of water.
“Marathon's stated reason for the termination was that the rig had not been accepted by Marathon by Dec. 31, 2010,” Noble said in a Jan. 3 release. “Noble believes the rig is ready to commence operations and should have been accepted by Marathon.”
Noble also reported that an independent third-party affirmed the rig's readiness and that the unit's subsea system, including the blowout preventer, has received its certificate of compliance.
The 4-year contract had a day rate of $515,000, and the day rate could have been as high as $550,000 depending upon cost escalators and revenues outlined in the contract, said John Freeman, an analyst with Raymond James & Associates.
“Moreover, the rig is currently in the Gulf of Mexico, where no deepwater work is being allowed,” Freeman said. “Bottom Line: The rig is now idle and we expect much lower rate as the company tries to secure work.” He suggested the day rate could be $400,000 with at least 3 months of downtime.
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