Seatrium Limited (Seatrium) refers to the announcement dated 24 April 2023 on the outcome of arbitration between its wholly-owned subsidiary, Seatrium New Energy Limited (formerly Keppel FELS Ltd) and Awilco Rig 1 Pte. Ltd. (AR1) for the B379 newbuild contract. The Award was made in favour of Seatrium New Energy Limited.
Subsequently, an arbitration award was received in November 2023 for another arbitration between Seatrium New Energy Limited and Awilco Rig 2 Pte. Ltd. (“AR2”), a sister company of AR1, in respect of the contract executed in March 2019 for the construction of a repeat midwater semisubmersible drilling rig, B382. The second Award was made against Seatrium New Energy.
As previously announced, Awilco ordered the two semi-submersible drilling rigs in 2018 and 2019 at a price of US$425 million each.In June 2020, Awilco terminated the contract for the construction of the Nordic Winter, citing a breach of contract by the shipyard and claiming that it was entitled to a The shipyard was entitled to a refund of the US$54.72 million installments paid to the shipyard, plus accrued interest. Keppel FELS denied the owner’s allegations of breach of contract and rejected the so-called “termination of contract” proposed by the other party.
In early December 2020, Keppel FELS terminated the contract for the construction of the Nordic Spring on the grounds that Awilco was unable to make the second installment payment, which was originally scheduled to be made in March 2021, and decided to start filing for arbitration and enforcing the shipyard’s rights. In late December, Awilco again terminated the contract for the construction of the Nordic Spring on the grounds of breach of contract by the shipyard, and stated that it was entitled to claim from the shipyard the $43 million in installments it had already paid, together with related interest.
Keppel FELS claims approximately $693.8 million for amounts recoverable under the termination clauses of the two shipbuilding contracts, including $424.9 million for the Nordic Winter and $268.9 million for the Nordic Spring. The claim has been categorically denied by Awilco. The parties have since commenced a litigation dispute that has lasted several years.
In April 2023, the Court of Arbitration ruled in favor of Keppel FELS in the Nordic Spring arbitration on the basis of relevant evidence submitted by Keppel FELS and Awilco’s subsidiary Awilco Rig 1 (AR1), while in November the Court of Arbitration ruled in favor of Awilco’s subsidiary Awilco Rig 2 (AR2) in the Nordic Winter arbitration.
Seatrium announced that Seatrium New Energy and RigCo Holding Pte Ltd (“RigCo”) have entered into a Settlement Agreement with Awilco Drilling PLC, AR1, and AR2. As full and final settlement of the two arbitration Awards, all claims, disputes and amounts owing between them arising from the contracts executed between Seatrium New Energy, and AR1 and AR2 respectively, AR2 will receive a settlement sum of US$57 million.
Notably, following the completion of the merger between the restructured Keppel Offshore & Marine (Keppel O&M) and the then Sembcorp Marine on February 28, 2023, all of Keppel O&M’s legacy rigs and their bareboat leases have been transferred to RigCo Holding, an asset holding company that is majority owned by outside investors.
Pursuant to the terms of the Asset Co Transaction, the rigs have been transferred to RigCo and Rigco will be liable for all and any monies payable by Seatrium New Energy pursuant to the Settlement Agreement. Rigco will also pay legal fees and costs incurred by Seatrium New Energy relating to the AR1 and AR2 arbitrations in accordance with the terms of the Asset Co Transaction. The US$57 million settlement will flow directly from Rigco to AR2. Hence, there is no financial impact nor working capital exposure to Seatrium New Energy or the Group.
Awilco is said to have emptied its drilling fleet in June 2022 following the sale of its rigs. In contrast, Seatrium has already bagged a number of offshore contracts for floating production, storage and offloading (FPSO) units, semi-submersible FPUs, and a number of repair and conversion agreements. Seatrium’s largest offshore contract so far this year is with Petrobras for the EPC of two FPSOs, P-84 and P-85, with a contract value of about S$11 billion.
In addition, Seatrium’s Jurong Shipyard has reached a final settlement with MHWirth, a subsidiary of Norwegian oil investment firm Akastor, agreeing to pay $68 million to Akastor to resolve a dispute over an equipment contract for four drilling rigs. Together with the $101 million awarded by the Singapore International Arbitration Center (SIAC) earlier this year, Seatrium will have paid a cumulative total of $176 million in the case.