Mexican firm Pemex Exploracion has issued a notice of termination of Seadrill’s contract for the West Pegasus drilling rig.

Seadrill said that the company has disputed the grounds for termination and is in the process of reviewing its legal options.

The company signed a commitment during the second quarter of last year for a two-year extension to the contract with Pemex for the rig.

"Seadrill will seek reimbursement of certain costs that have been incurred so far."

The dayrate for the remaining initial contract term was reduced in conjunction with the extension, which was finalised during the first quarter of this year.

Under the agreement, Seadrill and its 50%-owned joint venture with Fintech, SeaMex, agreed to reduce the dayrate on five jack-ups for 365 days.

This agreement was dependent upon receiving final confirmation of the extension for two years of the West Pegasus rig by Pemex.

Following termination, Seadrill and Seamex will recover the dayrate concessions, as well as demobilisation for the West Pegasus. 

In anticipation of the extension, Seadrill will also seek reimbursement of certain costs that have been incurred so far.

In September last year, Seadrill has been notified by Husky Oil Operations of the cancellation of the drilling contract for the West Mira drilling rig.

The company secured a five-year contract in the fourth quarter of 2012 for the West Mira with Husky for operations in Canada and Greenland.