PEMEX has issued a notice of termination of Seadrill’s contract for the drilling rig West Pegasus.

However, Seadrill disputes the grounds for termination and is reviewing its legal options.

During 2Q the contractor signed a provisional commitment for a two-year extension to the contract with PEMEX, with the day rate for the remaining term of the initial contract accordingly reduced. The contract extension was finalized during 1Q 2016. 

As part of this agreement, Seadrill and Seamex, the company’s joint venture with Fintech, agreed to reduce the day rate on five other jackups for a period of 365 days, contingent on final confirmation of the two-year extension of the West Pegasus by PEMEX. 

Seadrill says that in the event of a termination, it and Seamex are entitled to recover the day rate concessions as well as the demobilization costs for the West Pegasus. In addition, the contractor plans to seek reimbursement of certain costs incurred in anticipation of the extension.