Statoil Suspends Semi-Submersible Contract With Fred Olsen

Norwegian oil giant Statoil (OL:STL) ASA (NYSE:STO) announced its decision to suspend the contract for semi-submersible Bideford Dolphin with Fred Olsen Energy.

Per Fred Olsen, Statoil is expected to put the contract on hold once the rig completes drilling work off Norway by the end of this month. Notably, the Norwegian operator will continue to pay 80% of the operating dayrate during the suspension period.

The semi-submersible Bideford Dolphin was built during 1975. Under a three-year contract, which is due to expire in Jan 2017, the rig has been earning a dayrate of around $423,000.

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According to Statoil, the rig would restart work under the contract with a Fred Olsen subsidiary – Dolphin Drilling – in October.

The move represents Statoil’s second such rig suspension of late. Last week, Statoil suspended its contract with Songa Offshore for another long-serving semi-submersible, Songa Delta.

As part of its cost-cutting effort, Statoil either suspended or cancelled contracts earlier. It also remains on track to trim the overcapacity in its portfolio. The company had earlier locked in rigs on contracts at relatively high dayrates and suffered when the commodity prices crashed, resulting in a slump in drilling activity.

In recent times, Statoil has delivered strong exploration results, adding significantly to its resource base by making several high impact discoveries. The latest finds give the company access to new regions of Norway, Russia, Azerbaijan, Tanzania as well as Australia, thereby paving the way for long-term growth.

Statoil holds a Zacks Rank #2 (Buy). Other well-ranked players from the energy sector are Boardwalk Pipeline Partners, LP (NYSE:BWP) , FutureFuel Corp. (NYSE:FF) and ReneSola Ltd. (NYSE:SOL) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).