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Samsung Heavy agrees to push back delivery for drill ship to Ocean Rig with penalty

South Korea’s Samsung Heavy Industries Co. has agreed with Ocean Rig UDW Inc. to push back the delivery date for a drill ship with a penalty that would push up the contract fee to $720 million, the company said.

The shipbuilder gained the order from the Greece-based offshore drilling contractor in August 2013 for $550 million. The delivery schedule was originally set for 2015 but was deferred twice to June 2017 and June 2018 at the request of Ocean Rig. The contract price was once increased to $700 million, and Samsung Heavy received $150 million in middle payment.

Another delay to September 2019 would push up the final payment dues to $720 million.

“Demand for drill ships is expected to rise amid strengthening international oil prices,” said an official from Samsung Heavy.

The repeated delay should not raise the possibility of a cancellation as the client has been willing to pay the penalty fees, it said.

The world’s third-largest shipbuilder by order book has been offering to stretch delivery schedule with penalty fees to lower the risk of a delivery failure. In January, it found a new buyer of a semi-submersible drilling rig whose original contract was terminated. Its other drill ship contract with Ocean Rig was canceled in February, and contract with U.S. Seadrill for two drill ships was also invalidated in March. Samsung Heavy has total five drill ships at its dockyards – two under construction, one under arbitration with PDC and two waiting for new buyers following contract cancellations.

Shares of Samsung Heavy Industries closed Thursday 2.18 percent higher at 7,500 won.
Source: Pulse

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