July 12, 2010 / 10:30 PM / in 7 years

UPDATE 2-Diamond moving 2nd rig out of US Gulf, Congo-bound

3 Min Read

* Ocean Confidence left at weekend, but due to come back

* Murphy had declared force majeure on the rig

* Diamond said Friday it would move another rig to Egypt

* Industry expects a few more rigs to follow (Adds comments from analyst and Oceaneering International executive, background)

By Braden Reddall

SAN FRANCISCO, July 12 (Reuters) - Diamond Offshore Drilling Inc (DO.N) said on Monday it would move a second deepwater rig out of the Gulf of Mexico to waters off the Republic of Congo due to a U.S. drilling moratorium, and the industry expects others to follow.

The U.S. government issued a revised moratorium on deepwater oil drilling on Monday, which it said would last until Nov. 30. An earlier drilling suspension, issued on May 27, was lifted by a U.S. Appeals Court on July 8. [ID:nN12269656]

The government had imposed the six month moratorium on drilling in water more than 500 feet deep after the April 20 blowout on a Transocean Ltd-owned RIGN.VX (RIG.N) rig operated by BP Plc (BP.L) that caused a catastrophic oil spill.

Diamond's move is with the same customer, Murphy Oil Corp (MUR.N), but the old four-year contract running to March 2012 has been restructured into a one-year Gulf of Mexico commitment set to restart when Murphy feels it can get permits and meet regulatory requirements.

On Friday, Diamond became the first company to pull a rig out of the Gulf of Mexico because of the deepwater moratorium. That rig had previously been contracted to Devon Energy Corp (DVN.N), which declared a force majeure. [ID:nN09154557]

The new international contract for the Ocean Confidence is for three wells, plus an option for extra work, and Murphy will handle the costs of mobilizing the rig to and from Congo. The two contracts combined will generate up to $234 million in revenue, Diamond said, without giving further details.

A Diamond spokesman was not immediately available to comment further.

The previous contract with Murphy paid Diamond a rate of about $510,000 per day for the Confidence. The rig departed the Gulf of Mexico over the weekend and is expected to arrive off Africa in about 60 days, Houston-based Diamond said.

Murphy and Cobalt International Energy Inc (CIE.N) had also sought to annul Diamond contracts because of the moratorium. Diamond had rejected those force majeure claims, which can let companies out of contracts due to events beyond their control.

There are about 30 rigs still in the Gulf of Mexico. Prior to the Confidence announcement, Jay Collins, chief executive of deepwater services firm Oceaneering International Inc (OII.N), said that five rigs could leave the Gulf of Mexico, while UBS analyst Angie Sedita predicted three or four more could go. (Reporting by Braden Reddall; editing by Andre Grenon)

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