It is not just the oil slump but termination of the contract by ROSNEFT OIL CO (OTCMKTS:RNFTF), which is adding to the troubles of offshore rig firm, Seadrill Ltd (NYSE:SDRL). It came to light that Rosneft has sent a termination notice to the company’s subsidiary North Atlantic Drilling Ltd. (NADL). The work under the said five-year term contract was supposed to commence during the summer of 2015.
Termination of $1B contract
NADL stated that it would have been very challenging on its part to conclude the said contract with Rosneft as per the agreed terms or the timeframe. Seadrill Ltd (NYSE:SDRL)’s NADL further stated that there were significant risks attached to the $4.1 billion order backlog associated with the drilling contracts of Rosneft. The current termination will now reduce NADL’s backlog by $1 billion. The company cited difficult market conditions and a challenging political environment as a barrier to the execution of the contract. NADL’s CEO Alf Ragnar Lovdal was upfront in accepting that execution of Rosneft’s contract appeared difficult. Meanwhile, NADL is expected to look out for further potential opportunities for its West Navigator vessel, which will be available following the termination of the contract.
Cancels Petrobras’ $1B order
Additionally, Seadrill Ltd (NYSE:SDRL) announced that it has taken out $1 billion worth of orders from its backlog relating to Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR). Seadrill took the move as the ongoing corruption scandal has hit the state-run Brazilian oil company. Seadrill Ltd (NYSE:SDRL) said in a note that it no longer believes that the contracts with Petrobras will be closed within the agreed timeframe or on the approved terms. The series of announcement did not leave a negative impact on the stock of Seadrill Ltd (NYSE:SDRL), which closed marginally up by 0.33% to $9.15. The stock retreated from its early day slump caused by a downfall in the oil prices.