UK player strikes a bargain with Seatrium over yearslong rig arbitration saga

Singapore-headquartered Seatrium has come to an understanding with the UK-based Awilco Drilling regarding the settlement of two arbitration cases related to rig termination deals, following the arbitration tribunal rulings, which were a mixed bag with the first one ending up in favor of Seatrium New Energy Limited, formerly Keppel FELS, and Awilco winning the second one.

After Awilco ordered two rigs – Nordic Winter and Nordic Spring – in 2018 and 2019, respectively, the company canceled both orders in 2020 due to an alleged breach of contracts, which Seatrium New Energy denied.

As a result, the two players have been in dispute since 2020 with Seatrium New Energy submitting claims concerning amounts recoverable due to termination provisions in the contracts for both Nordic Winter and Nordic Spring, in the amount of $424.9 million for the first rig and $268.9 million for the second one.

However, Awilco vehemently denied these claims. The tribunal hearing for the Nordic Winter rig was scheduled to begin in October 2022 with an award expected in 1Q 2023 while the hearing for the Nordic Spring rig was likely to follow in May 2023.

The arbitration tribunal’s ruling regarding the termination of a newbuilding contract between Awilco Rig 1 (AR1) and Seatrium New Energy for the construction of the first semi-submersible drilling rig with hull number B379, was made in favor of Seatrium New Energy in April 2023.

On the other hand, the ruling in the second arbitration case, concerning the termination of the newbuilding contract between Awilco Rig 2 (AR2), a sister company of AR1, and Seatrium New Energy for the construction of the second semi-submersible drilling rig with hull number B382, turned out to be in AR2’s favor in November 2023.

As arbitration rulings have been received, Seatrium New Energy and RigCo Holding have entered into a settlement agreement with Awilco Drilling, AR1, and AR2. Thanks to this, the four-year arbitration saga will be brought to an end with AR2 receiving a settlement sum of $57 million as a full and final settlement of the two arbitration awards, all claims, disputes, and amounts arising from the contracts executed between Seatrium New Energy, AR1, and AR2, respectively.

Based on the agreement related to the combination of Keppel O&M and Sembcorp Marine, rigs and their bareboat charter agreements forming part of Keppel O&M’s legacy rigs were to be transferred to Asset Co, majority-owned by external investors, on legal completion of the merger between the two players.

Therefore, the cases related to Awilco’s termination of two rig contracts have been transferred to RigCo, which will be liable for all and any monies payable by Seatrium New Energy under the settlement agreement along with legal fees and costs incurred during the AR1 and AR2 arbitrations. In line with this, the $57 million settlement payment will flow directly from Rigco to AR2, without any financial impact on Seatrium New Energy.

While Awilco Drilling has no rigs in its fleet, following the completion of the sale of its last rig in June 2022, Seatrium has been a busy bee this year with multiple new contracts in the bag.

The most recent one, which came from BP, is for early engineering works on a newbuild floating production unit (FPU) destined for the oil major’s deepwater project in the U.S. Gulf of Mexico. This followed a job secured with Petrobras for two floating production, storage, and offloading (FPSO) units.

The Singapore-based player also won a deal with SBM Offshore for the topside fabrication and integration of the FPSO Jaguar, which will work at ExxonMobil’s Whiptail oil development on the Stabroek block off the coast of Guyana.

This was proceeded by a contract with MODEC for the installation and integration of topside modules on board the FPSO Errea Wittu, which will work at ExxonMobil-operated Uaru field offshore Guyana.