Tullow Ordered to Settle Dispute
Bermuda-registered Seadrill said July 3 that its master limited partnership established 2012 Seadrill Partners, in which Seadrill holds a 46.6% stake, has been awarded a $273mn settlement by the English High Court, following a dispute with Tullow in relation to the early termination of the West Leo drillship.
Seadrill said the English High Court ruled that a total of some $273mn is either payable to Seadrill if a suitable parent company guarantee from the company is provided, or else into court within 14 days of the judgment. Seadrill had been seeking to recover standby and force majeure rates and early termination fees of $278mn plus interest and legal expenses.
Tullow said July 3 that the judge, Justice Teare, ruled that Tullow was not entitled to terminate its West Leo rig contract with Seadrill on December 4 2016 by invoking the contract’s force majeure provisions and, as such, Tullow had to pay Seadrill a contractual termination fee and other fees that built up in the 60 days before termination of the contract.
"We are disappointed with the decision and maintain the view that it was right to terminate the West Leo contract for force majeure," said Tullow. It is considering seeking leave to appeal the judgment.
It asserted that fees payable by Tullow are $254mn, and that it expects to be required to pay these fees within the next 14 days - but that Tullow itself would be liable for a net amount of about $140mn, for which it had already included a $128mn provision in its 2017 accounts and annual report.
Tullow noted that its partner Kosmos is disputing separately, through an arbitration against Tullow with the International Chamber of Commerce, its roughly 20% share of the liability of any costs related to the use of the West Leo rig beyond 1 October 2016. A decision is expected shortly.
Seadrill restructured
Lawyers at White & Case advised on how to restructure Seadrill following what they said July 3 was the largest Chapter 11 filing of 2017, advising the co-ordinating committee that represented $7.4bn in secured debt.
Chapter 11 is the American legal process for addressing insolvency that affords protection to the company about to go under, rather than to the creditors who would lose their money if it did.
White & Case partner Scott Greissman, who led the firm’s team advising on the matter together with maritime finance partner David Joyce, said: “It was one of the most complex restructurings in history, the largest ever in the offshore drilling sector, and one which has the potential to set groundbreaking precedents in offshore restructurings on both sides of the Atlantic."
The debt rose with the knock-on effects of the downturn in the oil market and the resulting decline in revenue forecasted in the short to medium term. On top of that was a ‘wall’ of debt maturities which ran from 2016 until 2020.