Noble Corporation Ordinary Shares (UK) (NYSE:NE) and Royal Dutch Shell plc (ADR) (NYSE:RDS.A) have agreed to revise three long-term contracts on ultra-deepwater drillships amid a challenging business environment for drillers. The amended agreement mainly affects rigs dayrates. Noble said the revision of the contracts benefits both parties.

Affected contracts

Noble and Shell have altered contracts involving Noble Globetrotter I, Noble Globetrotter II and Noble Bully II, which were signed for 10-year contracts commencing between 2012 and 2013.

While the contract period remains unchanged, the dayrates for Noble Globetrotter I and Noble Globetrotter II rigs have been cut to $275,000 per day. As for Noble Bully II, the dayrate has been lowered to $200,000 per day. Earlier, Noble Globetrotter I contract carried a dayrate of $436,000 and Noble Globetrotter II carried a dayrate of $434,000. The dayrate for Noble Bully II was $456,000.

Idling of rigs

Noble and Shell have also agreed to idle two rigs. Noble Bully II will be idled for about 365 days beginning May 2017 and the dayrate during that idle period will be $200,000. Noble Globetrotter II will be idled for 730 days commencing January 2017 and the dayrate during the idle period will be $185,000.

However, Noble can contract the rigs third parties during the idle period to generate incremental revenue.

“These amendments will provide Noble with enhanced financial flexibility at a time when the offshore industry is experiencing a cyclical bottom and the timing of the inevitable recovery remains unknown,” said Noble CEO David W. Williams.

Stock retreats on rates adjustment

While Noble sounds optimistic about the contract revision with Shell, investors have a bearish view of the new development, especially the steep decline in dayrates. As such, shares of Noble plunged 5.4% to close at $7.23 in the last session. The stock is down more than 30% since the beginning of 2016.