Brazil's Petrobras Cancels $127 Million Drilling Contract With R&B Falcon
Petrobras Cancels $126.5 Mln Contract With R&B Falcon (Update1)
(Updates with analyst's comment in 3rd, 4th paragraphs.)
quote.bloomberg.com
Houston, May 19 (Bloomberg) -- Petroleo Brasileiro SA,
Brazil's state-controlled oil company, said it canceled a
$126.5 million drilling-rig contract with R&B Falcon Corp. after
the U.S. company couldn't complete the rig's renovation on time.
Petroleo Brasileiro, known as Petrobras, said it canceled
the four-year contract for the Falcon 100, expecting it can lease
another rig for less for its Barracuda field off Brazil.
Petrobras also said it could use its own equipment, since it
expects to use fewer rigs in the Barracuda field than it
estimated.
Low oil prices have cut demand for rigs and reduced rental
rates. New rigs often take longer than expected to build, and
many oil companies are now using the delays to get out of
contracts and save money, said Byron Dunn, a Warburg Dillon Read
analyst. Last month BP Amoco Plc canceled a contract with R&B
Falcon, the fourth-largest U.S. driller, because of delays in a
$270 million rig upgrade.
''It's a pervasive problem in the industry,'' said Dunn, who
rates R&B Falcon shares a ''buy.''
Petrobras also canceled a separate $9.4 million contract
with R&B Falcon for well analysis and other services, said
Petrobras's Jose Coutinho Barbosa, director of exploration and
production.
R&B Falcon didn't return calls to comment. In a U.S.
Securities and Exchange Commission filing this week, the company
said Petrobras might cancel the contract, though R&B Falcon said
it didn't have the right to do so.
The upgrade of the Falcon 100 is expected to cost about
$118 million, nearly double the original estimate, R&B Falcon
said in an SEC filing. The work, which was to be completed by
January, is now expected to take until the end of June, the
company said. R&B Falcon said in the filing that it faced
$14.7 million in late-delivery penalties under the Petrobras
contract.
Petrobras, Brazil's biggest company, lost more than
$900 million in the first quarter, wiping out all of last year's
profit, as Brazil's currency devaluation sent the value of its
dollar debt soaring.
Shares of Houston-based R&B Falcon, which are down more than
65 percent in the past year, fell 1/16 to 10 in midafternoon
trading. Rio de Janeiro-based Petrobras fell 3 reais to 2556.
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