Brazil’s state-controlled oil giant Petroleo Brasileiro S.A. (NYSE: PBR), or Petrobras, announced today that it was cancelling an order for five new drill ships that had been placed with Ocean Rig UDW Inc. (NASDAQ: ORIG). The five rigs were planned to be put to work in the presalt layer of the Santos Basin, at water depths up to 3,000 meters (just shy of 10,000 feet).
In its press release, Petrobras said:
This decision is based on the reduction of future needs for drilling, due to a fewer number of wells expected to be drilled in the pre-salt Santos Basin, relating to a higher productivity gained through the project wells in that area.
Given the company’s lack of production growth, however, that may not be the entire story. Petrobras could be looking for ways to maintain profitability in the face of its long-term $236 billion spending plans.
The five rigs were ordered in February at a daily rate of $548,000 for a 15-year term. At the time, Petrobras ordered a total of 26 new rigs, all to be built in Brazil.
Shares of Petrobras are down 1.4% in early trading this morning, at $18.23 in a 52-week range of $17.27 to $32.60. Ocean Rig shares are down 1% at $15.68, in a 52-week range of $11.70 to $18.43.