Offshore driller Valaris Limited has received a termination notice from Equinor for the drilling contract awarded to the Valaris DS-11 drillship.

The termination will take effect at the end of June. According to Valaris, the total contract backlog of $2.5 billion as of May 2, 2022, including approximately $428 million related to this contract.

“As a result of the contract termination, Valaris will receive an early termination fee that is more than sufficient to cover expenses and commitments incurred by Valaris on the project,” the offshore driller said.

“While we are disappointed that this contract has been terminated, the floater market and day rates have improved meaningfully since this contract was entered into in July 2021, and we expect there will be other attractive projects for a high specification drillship like Valaris DS-11 with similar or earlier commencement dates,” President and Chief Executive Officer of Valaris Anton Dibowitz said.

The whole deal about the contract was a little complicated to begin with. Namely, the Valaris DS-11 drillship, formerly named the Atwood Advantage and Ensco DS-11, was initially hired by TotalEnergies for an eight-well job on the North Platte deepwater project in the U.S. Gulf of Mexico.

The contract was awarded in 2021 and the drillship, stacked in Las Palmas, Spain, was scheduled to start work in July 2024 and run until December 2027.

The French oil major decided to withdraw from the project in February 2022 to focus on better opportunities to allocate its capital.

It was unknown what would happen to the contract for Valaris DS-11 until Norwegian energy major Equinor, TotalEnergies’ partner in the project, decided to take over the drillship contract.

No material changes to the contract resulted from the novation, including with respect to the termination provisions in the event the project does not receive a final investment decision (FID).