Legal spat over rig contract breach nearing its end with Seadrill ordered to pay SFL $48 million

A court order is bringing a legal battle over an alleged contract breach to a close by instructing Bermuda-headquartered offshore drilling contractor Seadrill to pay multimillion-dollar compensation to the owner of a semi-submersible rig, which was hired under the contract that sparked the dispute between the duo. If neither company decides to appeal the decision, the court fight will be over.

According to SFL Corporation, the Oslo District Court has delivered its ruling regarding the legal case between the firm’s rig-owning subsidiary and subsidiaries of Seadrill, following the redelivery of the Hercules rig to SFL in December 2022.

Back in August 2021, SFL entered into an amendment to its existing charter agreement with subsidiaries of Seadrill for the harsh environment semi-submersible rig contracted to be employed with an oil major into the second half of 2022, prior to being redelivered to its owner in Norway.

Based on these changes, SFL agreed to receive a bareboat hire of approximately $64,700 per day until Seadrill’s emergence from Chapter 11. After the emergence date, the firm would get around $60,000 per day while the rig was employed under a contract and generating revenues for the Bermuda player.

SFL also said yes to about $40,000 in all other scenarios, including when the rig was idle or undergoing mobilization or demobilization, which Seadrill agreed to fund. The Bermuda-based firm was expected to seek bankruptcy court approval of the amendment agreement on or before September 2, 2021, as a condition precedent to the effectiveness of the amendment agreement.

Each of SFL’s financing banks stated it would consent to the amended agreement, and the owner’s limited corporate guarantee of the outstanding debt of the rig-owning subsidiary remained unchanged at $83 million.

Seadrill already hammered out a reorganization plan in July 2021 with its consenting lenders, which would allow it to emerge from Chapter 11 bankruptcy; thus, the firm expected to get approval for the plan in early November 2021.

The company emerged from Chapter 11 bankruptcy in February 2022, a little over a year after announcing its second bankruptcy filing in about four years. Odfjell Drilling made arrangements with SFL in May 2022 to take over marketing and management services for the Hercules rig from Seadrill.

Before SFL signed a contract with a subsidiary of Galp Energia for the Hercules semi-submersible rig with an estimated contract value of approximately $50 million in May 2023, the rig owner filed a claim in March 2023 in the Oslo District Court regarding Seadrill’s redelivery of the semi-sub in December 2022, which allegedly was not done in the condition specified in the duo’s contract.

Therefore, the firm sought damages of around $28 million. The court issued a judgment on February 5, 2025, in favor of SFL’s subsidiary where certain subsidiaries of Seadrill were ordered to pay SFL an amount equivalent to approximately $48 million in compensation. This includes late payment interest and legal costs, because of its alleged breach of contract upon redelivering the rig to SFL.

“We will carefully review the details of the court’s judgment and note that the ruling is subject to appeal from both sides by March 5, 2025,” highlighted SFL.

The 2008-built Hercules sixth-generation deepwater and harsh environment semi-submersible rig of GVA 7500 design can accommodate 180 people and operate in water depths of 10,000 feet (3.05 kilometers).

The rig’s maximum drilling depth is 35,000 ft. The semi-sub was hired by Equinor in August 2023 for one firm well. The deal also contained one optional well.