Defacto Moraitorium: More rigs to leave GOM?

[B]Drilling Woes: Marathon intends to declare force majeure on Noble Jim Day ultra-deepwater rig[/B]

December 2, 2010
Source: Noble Corp.
Noble Corporation (NYSE: NE) has received notice from Marathon Oil Company (NYSE: MRO), its customer for the ultra-deepwater semisubmersible Noble Jim Day, of Marathon’s intent to exercise its right of termination if the unit does not commence operations by December 31, 2010.

As previously disclosed, Marathon has the right to terminate the drilling contract in the event the unit is not ready to commence operations by December 31, 2010. Marathon further provided notice that it believes the failure of the U.S. Department of the Interior to finalize deepwater drilling and spill response regulations and the Department’s decision to withhold new deepwater drilling permits is a force majeure event. Additionally, Marathon attempted to provide notice of a force majeure condition under the contract in the event the rig is accepted by December 31, 2010.

The Company continues to work diligently with Marathon to complete acceptance testing and believes the rig is materially complete and that Marathon should fulfill its contractual obligation to accept the rig prior to December 31, 2010. The Noble Jim Day arrived in the U.S. Gulf of Mexico on September 24, 2010 to begin its final acceptance process for Marathon.
In light of Marathon’s notice, the Company is evaluating all of its options and intends to vigorously defend its rights under the drilling contract. Additionally, the Company is considering alternative operational opportunities for the unit in the event Marathon attempts to reject the rig

[B]Marathon seeks to cancel a rig deal[/B]



WASHINGTON — [B]Marathon Oil Corp.[/B] is moving to cancel its contract to lease one of Noble Corp.'s [B]offshore drilling[/B] rigs - joining a list of operators wriggling out of rig rental agreements amid fears that it could take months for deep-water exploration to resume in the [B]Gulf of Mexico[/B].
At least five deep-water drilling rigs have left the Gulf of Mexico since the Obama administration’s May 27 decision to halt exploration in more than 500 feet of water. Although the government lifted that moratorium on Oct. 12, it has yet to approve any new deep-water well projects that would have been blocked by the ban.
Some rig owners have renegotiated leases and are charging lower day rates to keep idle vessels under contract.
[B]Transocean[/B] is in fresh talks with three companies - [B]Shell Oil Co.[/B], [B]Anadarko Petroleum Corp.[/B] and [B]BHP Billiton[/B] - to salvage drilling rig leases.
And Ensco just announced it was deploying one of its ultradeep-water drilling rigs to French Guiana, in a sublet that effectively gives the current leaseholder, Cobalt, more time to secure drilling permits and line up work in the Gulf. Ensco Senior Vice President Carey Lowe said the arrangement was a win-win for all parties and called it an innovative solution.
In the latest move by Marathon, the [B]oil company[/B] said it would terminate its contract for an ultradeep-water semisubmersible rig known as the Noble Jim Day if it does not begin work by Dec. 31.
To get out of the rig leases, oil companies are invoking [I]force majeure[/I] termination clauses that allow contracts to be voided in the case of natural disasters, acts of God and other unforeseen events.
In a statement late Thursday, Noble Corp. said Marathon made clear "it believes the failure of the [B]U.S. Department of the Interior[/B] to finalize deep-water drilling and spill response regulations - and the department’s decision to withhold new deep-water drilling permits - is a [I]force majeure[/I] event."
Analysts at the investment bank FBR Capital Markets lowered their estimates for Noble based on Marathon’s plan to cancel the Jim Day contract and projected that even if the rig is under a new contract by April 2011, it will be leased for a day rate of $430,000 instead of the roughly $514,000 per day that Noble is charging now.
FBR also warned of similar heartburn for shallow-water rig owners, given continued permitting delays and the number of shallow-water jack-up rigs that are set to roll off contract later this year