North Atlantic Drilling, a subsidiary company of Seadrill Ltd (NYSE:SDRL) announced it postponed a cooperation deal with Rosneft till the end of May 2017. The company will renegotiate the terms of the agreement. All the related parties have given their consent to extend the date. Also, any party is free to terminate any offshore contracts and/or the Framework deal at any time before May 31, 2017 at no cost.
The deal details
Last November, the deal between Seadrill’s subsidiary and Rosneft was delayed till May 2015. Under the deal, North Atlantic Drilling would buy almost 150 land rigs from Russia’s Rosneft. In return the seller company would take close to 30% stake in the company. Even after the deal rig operator Seadrill would remain the majority shareholder.
The western sanctions imposed against Russia and Rosneft has raised concerns on the proposed agreement. The sanctions have already forced Rosneft to terminate several contracts with North Atlantic Drilling. The two companies intends to renegotiate the deal terms as the rig rates collapsed with 50% decline in crude oil prices. The industry has been witnessing deep investment cuts. The previous agreement included six offshore contracts. However, two contracts were cancelled by Rosneft in March. North Atlantic Drilling stated its rigs covered in the deal can sign binding contracts with other firms. Even they are permitted to postpone construction activities and delivery of any of the rigs.
The latest announcement comes as a disappointment for both the companies. In fact things are becoming tough for Seadrill. The company already lost a contract from BP plc (ADR) (NYSE:BP). Therefore, it announced that it will reduce 159 offshore jobs and 4 onshore jobs given to the West Sirius Rig. The job cuts are expected to take place in April, May and beyond. The rig will commence with shutdown preparations and will be closed in the coming months.