Premier Oil and Noble Energy have issued a termination notice for the Eirik Raude rig.
The company said as a result of the move it will no longer be drilling the Chatham exploration well during the current campaign.
A spokesman said it is in discussions with the Falkland Islands Government regarding the possibility of drilling the prospect in the future.
The rig was first entered into the contract in June 2014.
Earlier this month Premier Oil’s shares more than doubled after trading resumed.
It followed the suspension of the company’s shares caused by the acquisition of E.ON’s North Sea assets.
The UK independent had suspended its share on January 13th after agreeing to buy E.ON’s North Sea assets for $120m.
It said the cost of the deal would now come to $135m, as a result of an increase of the dividend paid to E.ON prior to completion.