SembMarine calls off Oro Negro contracts for 3 jack-ups

SEMBCORP Marine said before Wednesday trading hours its rig-building unit, PPL Shipyard Pte Ltd, has terminated contracts with Integradora de Servicios Petroleros Oro Negro, SAPI de CV and its subsidiary Oro Negro Vastus Pte Ltd for three jack-up rigs.

Mexico-focused Oro Negro has ordered these jack-up rigs at over US$200 million apiece from PPL Shipyard.

The rig owner and operator had placed orders for half a dozen jack-ups with PPL between early 2012 and late 2013, just before oil prices collapsed in the second half of 2014.

These rig orders were then premised on a surge in offshore drilling demand that was projected to come with the liberalisation of Mexico's oil and gas (O&G) sector. That surge in offshore drilling activity did not materialise with oil companies having held back on capital expenditure plans after oil prices crashed.

Mexico's national oil company Pemex has just turned profitable the last three quarters after having sustained losses through a prolonged low oil price environment lasting over two years since 2014.

But the recovery in Mexico's O&G sector may have come too little too late to deliver the glittering promise that was to support what is remaining of Oro Negro's massive rig-building programme at PPL Shipyard.