Seadrill Ltd. is reviewing its legal options after Pemex backed out of a two-year extension to contract the West Pegasus semisubmersible drilling rig, Seadrill said in a news release.

The termination became effective Aug. 16.

The offshore drilling contractor said a provisional commitment for the two-year extension was signed during second-quarter 2015 and the day rate for the remaining term of the initial contract was reduced. Seadrill said the extended contract was finalized during first-quarter 2016.

As part of this agreement, Seadrill and its 50%-owned joint venture with Finetech, Seamex Ltd., agreed to lower the day rate on five jackups for 365 days, the release said. The agreement to reduce the day rates of the existing contracts was contingent upon final confirmation of the two-year extension of the West Pegasus by Pemex management.

In the event of termination, the release said, Seadrill and Seamex are entitled to recover the day rate concessions as well as the demobilization for the West Pegasus. Seadrill said it will also seek reimbursement of certain costs incurred in anticipation of the extension.

Offshore