Tullow Oil issued a notice of force majeure to Seadrill Partners on October 3 for the West Leo semi-submersible. The unit had been carrying out work on Ghana’s TEN development.
Tullow Oil issued a notice of force majeure to Seadrill Partners on October 3 for the West Leo semi-submersible. The unit was carrying out work on Ghana’s TEN development.
A notice from Seadrill said it disputed the force majeure claim from Tullow Ghana and that it would “enforce all its rights as per the contract and governing law”.
Tullow was said to have halted its contract on the basis that work on the TEN development could not continue, owing to an arbitration case between Ghana and Cote d’Ivoire on the disputed border. While the case is being considered, Tullow is prevented from drilling any new wells – but can work on those already drilled.
Seadrill, though, sees it differently. The company said that there were other fields within Ghana where the West Leo has worked previously and that are not subject to arbitration proceedings.
“However, as part of its claim, Tullow has asserted that a further drilling moratorium applies to these additional fields, although no satisfactory justification [for this action] has been provided,” the rig owner said.
According to Seadrill’s quarterly update at the end of September, West Leo was delivered from the shipyard in 2012 and was operated under a contract with Tullow, due to expire in July 2018. The semi-submersible earned US$234.7 million for Seadrill in 2015, with a contracted dayrate of US$605,000 – the third highest in the company’s fleet.
Tullow has been holding investor meetings this week, allowing it to support its take on the force majeure filing. The company has “satisfactorily explained” the issue, Jefferies’ Mark Wilson said in a note on October 4.
The semi-submersible had completed work at TEN, which is under dispute, and there is no drilling possible at Jubilee either, while Tullow waits for approval of the development plan from the government.
As such, Wilson said, once the West Leo is off contract, which will occur after a contracted 60-day period, the company will only have one rig under contract: the PR Marriott in Kenya’s Lokichar Basin, Wilson said. Capital expenditure this year was unchanged at around US$1 billion, with the Jefferies analyst estimating this will fall to US$325 million in 2017.