The Valaris DS-8’s blowout preventer (BOP) dropped to the seabed on March 7 and the company is now trying to retrieve it.
Valaris said the rig had experienced a non-drilling incident while working offshore Angola, which led the BOP to disconnect while moving between well sites. No injuries, pollution or third party damage has been reported and Valaris is investigating the incident.
The rig is under contract until November 2020 at a rate of $620,000 per day. The BOP incident could lead the operator, Total, to terminate the contract, which would reduce Valaris’ EBITDA guidance by around $150 million, to $210-240mn. This includes repair costs for the BOP.
Valaris has insurance coverage for loss of hire. This has a 45-day waiting period before money would be paid out. The company warned that there were no certainties about when, and how much, the insurance proceeds might be.
The drilling company’s average rate in the fourth quarter was $205,000 per day.
The DS-8 has been under contract to Total since November 2015. Valaris has contracts for two other rigs working in the West African state, a jack-up for Chevron and the DS-12, which will be working for BP from July 2020 to January 2021.