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Greetings From Petrobras (Part 3): The Case Of Paragon Offshore

Paragon Offshore was close to a final deal with Petrobras regarding its three rigs: DPDS2, DPDS3 and MSS2.

The new proposal will be, to release a year earlier of the original charter terms the two drillships DPDS2 and DPDS3. However, the MMS2 will be kept on until 2018.

I estimated a loss of backlog from the original remaining backlog of $118 million after the potential 2-year contract for the semisub MSS2.

This article is an update to my preceding article about Paragon Offshore (NYSE:PGN) on September 3, 2015 related to Petrobras and the DPDS2, DPDS3 dispute.

Yesterday, October 9, 2015, we learned that Paragon Offshore was close to a final deal with Petrobras regarding its three rigs. Mr. Gareth Chetwynd wrote in

A team of negotiators overseen by Petrobras executive Rudemar Lorenzatto and his right-hand man Marcelo Santa Rosa, have taken a carrot and stick approach to secure the cuts, offering some extended charters to the desperate drillers...

...The closest that Petrobras has come so far to triggering arbitration proceedings in these delicate talks was with Paragon Offshore, concerning the DPDS2 and DPDS3, formerly known as the Noble Leo Segerius and Noble Roger Eason.

...The two drillships will still be released a year ahead of the original charter terms, but the MMS2 will be kept on until 2018.

...The Paragon deal is still being finalised

The situation was presented to PGN shareholders at the last conference call, M. Andrew Tietz, SVP commented:

Recently, Petrobras announced their latest five-year business plan. They plan on reducing their term capital expenditure budget by 40%. As a result, they have terminated or amended a number of drilling contracts with our competitors. Petrobras has indicated to us that they may contest the term of our drilling contracts for the DPDS2 and the DPDS3 in connection with...