Petrobras Canceled Leases with Schahin for five Vessels

Source: Reuters 5/28/2015, Location: South America

Brazil's state-run oil company Petrobras canceled leases with Schahin Petroleo e Gas SA for five offshore oil drilling and production vessels after a cash crunch forced the ship leaser to remove the equipment from service for nearly a month, Schahin said.

The decision, if upheld, will result in the loss of more than 1,000 related jobs, Schahin said, while creditors and investors stand to lose more than $4 billion. Schahin said it plans to sue Petrobras, as the oil company is known, to reinstate the contracts.

Petrobras officials did not respond to a request from Reuters for comment.

Petrobras has been trying to slash costs in the face of falling oil prices, soaring debt and record losses related to poor planing and the fallout from a giant price-fixing, bribery and political kickback scandal.

In the lower oil price environment, Petrobras, the world's most indebted oil company, and third most indebted non-financial company, faces a market with a growing number of unused vessels and falling day rates. Deepwater drillships that rented for $500,000 or $600,000 a day several years ago can now be leased for $400,000 or less, according to industry sources.

The five Schahin vessels are the drillships Cerrado Sertao and Lancer and the semi-submersible oil production platforms Amazônia and Pantanal. All had been on long-term leases.

Schahin said it was forced in early April to temporarily pull these vessels from service with Petrobras for nearly a month and move them to port after a lack of cash to pay debt led a creditor to seek the sale of assets. The creditor was leasing the Pantanal and Amazônia to Schahin.

In late April, after renegotiating a $1 billion reduction in debt Schahin informed Petrobras that the ships were ready for service. On May 21 Petrobras canceled the leases, Schahin said.

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