HOUSTON – Offshore drilling contractor Hercules Offshore says it has reached a deal with Saudi Aramco to dramatically reduce it day rates for three jackup rigs working in the Persian Gulf, effectively cutting those rates in half.
The world’s biggest oil producer now plans to pay Hercules $67,000 a day for each rig. The original rates for those units fell between $117,000 to $136,000, putting Saudi Aramco’s cuts in line with similar contract revisions in the region, according to investment banking firm Simmons & Co. International.
The news comes four months after Saudi Aramco signaled it would terminate a five-year contract for one of the three Hercules rigs. Earlier on Monday, Saudi Aramco said it wouldn’t cancel the contract after all.
Hercules shares had jumped as investors welcomed the news, a rare sign of optimism for a company that has had to sell off several rigs and cut 40 percent of its employees as it dealt with the oil industry downturn. Drilling work has evaporated after a 12-month slump in crude pries.
Saudi Aramco’s contract with Hercules will run through November 2019. The decision to keep the contract in place comes weeks after oil prices rallied and as the Saudi-led Organization of Petroleum Exporting Countries has increased its oil production.
The Hercules rigs were built in the 1970s, according to data compiled by Rigzone.
Hercules has cold-stacked 11 of its 20 rigs in the Gulf of Mexico. Cold-stacking is industry shorthand for shutting a rig down and leaving it largely unmanned for long periods of time. Last month, it said just five of its rigs were currently working in the Gulf, with a few others ready for deployment.
Hercules shares increased 7 cents in pre-market trading Monday to 71 cents a share on the New York Stock Exchange.