Seadrill (SDRL – Get Report) stock is higher by 4.95% to $6.78 in mid-morning trading on Tuesday, after announcing it had cancelled a rig construction contract with Korea’s Hyundai Heavy Industries.
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West Mira, a sixth generation ultra-deepwater harsh environment semisubmersible drilling unit, was ordered during the second quarter of 2012 and was supposed to be delivered at or before December 31, 2014. In turn, SeaDrill has exercised its right to cancel the order.
Husky was responding to news released yesterday concerning the cancellation of the contract to build a new semsubmersible drilling unit. The company had already paid $168 million in installments toward the ship’s cost, but says it will be able to recoup those funds, plus interest.
In the fourth quarter of 2012 Seadrill was awarded a 5 year contract for the West Mira with Husky Oil Operations Limited (Husky) for operations in Canada and Greenland.
As a sweetener for the delay, Seadrill said it had “tentatively agreed” to reduce the day rate of the Mira for Huskey at the start of the year, clearly believing that the delivery of the semisub was imminent.
With that said, the worst-case scenario is Seadrill being in basically the same shape as before the cancellation, with the upside that it can work something out with Husky on one of the other newbuilds.
Also, out of the total fourteen, ten have to be delivered in this year itself, which suggests Seadrill Ltd (NYSE:SDRL) has adequate work to complete to in 2015. It remains to be seen.
Some better-ranked stocks from the oil and gas drilling industry are Seadrill Partners LLC SDLP, Transocean Ltd. RIG and Pacific Drilling S.A. PACD.
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