Saudi Aramco cancels rig contract

U.S. rig company Hercules Offshore said Thursday one of its drilling contracts with the main oil company in Saudi Arabia was terminated.

Saudi Aramco cancelled a contract to lease the Hercules 261 rig, effective March 27. The company said it's been in talks with the Saudi oil company to reduce the day rates for two other rigs, Hercules 262 and Hercules 266.

"The company has not received a notice of termination from Saudi Aramco with respect to these rigs," Hercules said in a statement.

Hercules 261 is listed in the company's fleet status update as having a day-rate around $135,000. Rigs 262 and 266 have a combined average day rate of around $118,000.

There was no update on the status of rig contracts with Hercules from Saudi Aramco.

The rig announcement from Hercules comes as most oil and natural gas companies are cutting back on spending for exploration and production in the weak crude oil market.

When announcing fourth quarter earnings earlier this month, Hercules Chief Executive Officer John Rynd said the significant decline in crude oil prices made "what was already a challenging environment" even worse as rig demand plummets.

A Saudi decision in late November to keep oil production steady added further strain to an already weakened commodity market. Saudi Aramco leaders said from the sidelines of the World Economic Forum last month the company was "resilient and committed to its long-term strategy."

Hercules rival Transocean reported a net $739 million loss in the fourth quarter.