Noble Corp. has reached an agreement with Freeport-McMoRan Oil & Gas in connection with the drilling contracts for the drillships Noble Sam Croft and Noble Tom Madden, which were scheduled to terminate in July and November 2017, respectively.

Pursuant to the agreement, the contracts will be terminated, with operations ceasing as soon as practicable, and Freeport will make a payment to Noble of $540 million. In addition, Noble can receive additional contingent payments from Freeport of $25 million and $50 million, respectively, depending upon the average price of oil over a 12-month period. Noble also expects to realize over $100 million in direct cost savings as a result of the contract terminations through crew reductions and stacking procedures.

Freeport recently announced a restructuring of its oil and gas business, which is operated through FMOG. As disclosed in Freeport’s public filings, FMOG has substantial debt and has been negatively impacted by the crash in oil prices.

“This agreement represents a favorable resolution for Noble shareholders,” said David W. Williams, chairman, president and CEO, Noble Corporation. “By accelerating the contract value and removing counterparty risk and potential downtime exposure over the remaining term of the contracts, Noble will be able to secure the economic benefit of these contracts, particularly when factoring in the significant cost savings available.”