July 1, 2010 / 5:19 PM / 7 years ago

UPDATE 2-Rowan to move 2 Gulf of Mexico rigs elsewhere

5 Min Read

* Rowan says move due to demand, not tighter regulation

* Apache ends force majeure claim, sees permits momentum

* Rowan to buy Norway's Skeie Drilling

* Rowan shares off 1.1 pct after losing as much as 6.8 pct (Adds comments from Rowan CEO, Apache, updates shares)

By Braden Reddall

SAN FRANCISCO, July 1 (Reuters) - Offshore rig contractor Rowan Cos Inc (RDC.N) said on Thursday it was in talks to move two high-end shallow-water rigs out of the Gulf of Mexico, but said this was due to demand elsewhere, not tighter U.S. regulation in the Gulf.

At the same time, client Apache Corp (APA.N) ended its claim of force majeure and thus its dispute with Rowan after it received a permit for their shallow-water drilling project in the Gulf of Mexico and said it hoped the momentum of the permits process -- slowed under new U.S. regulations after the disastrous BP Plc (BP.L) well blowout -- would continue.

The news came the same day that Rowan unveiled plans to buy Norway's Skeie Drilling SKDP.NFF, which itself is building three high-end jackups, for some $250 million. [ID:nN01114673]

Rowan shares fell nearly 7 percent but then, helped by news of the end to the Apache dispute, recovered most of those losses in afternoon trading. A sharp drop in oil prices weighed on the sector.

There has been speculation that companies would pull rigs from the Gulf of Mexico due to the six-month U.S. deepwater moratorium and the accompanying tightened regulations on all drilling, but Rowan said it was moving the two rigs, the Ralph Coffman and Bob Palmer, because of demand for them elsewhere.

It did not say where it was moving the rigs, with the contracts still being negotiated.

Mark Keller, Rowan's executive vice president of business development, said he expected three-year contracts for the rigs -- with the same customer -- to be completed within two to four weeks, with one rig ready to leave by September and the other by December.

"We are not tendering these high-spec rigs out of the U.S. Gulf of Mexico because we have lost confidence in this market," Keller said. "We believe the U.S. Gulf of Mexico will return to a normal level of permit activities soon, and we remain bullish on the deep gas play in the region."

Rowan, which currently has seven Rowan rigs contracted in the Gulf of Mexico, said last Friday that greater constraints on drilling companies in response to the BP blowout had greatly slowed shallow-water work. [ID:nSGE65O0F4]

Apache had declared force majeure on a jackup as a result, before rescinding that claim on Wednesday, Rowan said.

A number of deepwater rig operators have had clients declare force majeure after the U.S. moratorium. Force majeure allows a company out of contractual obligations because of natural or unavoidable catastrophes. [ID:nN28271791]

But Rowan Chief Executive Matt Ralls said he believes the force majeure declarations among shallow-water operators were simply strategic moves in case the U.S. permitting process proved too onerous, and did not show that the operators wanted out of the contracts.

"As far as the jackup market, there are completely different dynamics in the Gulf of Mexico regarding the force majeures that did occur," he said on a conference call to discuss Skeie. "That was really just operators that were trying to position themselves in case it took longer to get permits."

Apache said U.S. regulators were working as quickly as they could under the new rules, and it was encouraged by the permit award that allowed it to drop the force majeure claim, which was followed quickly by approval of a separate permit.

"Hopefully, this momentum of getting permits will continue," an Apache spokesman said.

On Monday, Hercules Offshore Inc HERO.O said Chevron Corp (CVX.N) had declared a force majeure on one of its jackups in the Gulf of Mexico. [ID:nN28154545]

A Chevron spokeswoman declined to comment directly on the discussions earlier this week. "It is unclear when we will be allowed to resume drilling in the Gulf of Mexico, but we hope we will be allowed to return to work soon."

Shares of Rowan fell as low as $20.45, losing 6.8 percent, before recovering much of their losses to close at $21.69, down 1.1 percent, on the New York Stock Exchange. (Reporting by Braden Reddall; Editing by Lisa Von Ahn, Gary Hill)

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