Billionaire John Fredriksen-owned offshore drilling company Northern Drilling said Tuesday it had canceled a drillship resale contract with the South Korean shipbuilder Daewoo Shipbuilding & Marine Engineering (DSME).
In May 2018, Northern Drilling signed agreements with DSME to buy two newbuilding 7th generation DP3 and ultra-deepwater capable drillships DSME known as the West Aquila and the West Libra, for $296 million each with $90 million paid at contract signing and the remainder at delivery.
However, Northern Ocean said Tuesday it had canceled the contract for the West Aquila drillship due to delay of delivery as well as a repudiatory breach of contract.
Northern Drilling, via its West Aquila subsidiary, has made advance payments totaling approximately $90 million under the drillship contract. The company said it would claim a refund of the installment paid, plus interest and damages.
"If this claim is disputed, the company will seek an award via London arbitration in accordance with industry-standard procedures and timescales," Northern Drilling said.
The contractual delivery dates for the West Aquila and West Libra were in January and March 2021.
In its quarterly report released on May 28, Northern Drilling said the drillships had not been delivered to the company and there were still some remaining items to be completed by the shipyard.
While it canceled the West Aquila order, Northern Drilling did not say what its plans were for the West Libra rig.
The two drillships were originally ordered in 2013 by Seadrill. Seadrill then in 2016 agreed with DSME for the deliveries to be delayed for 2018 and 2019, but it then in March 2018 canceled the contracts.
To remind, back in October 2019, Northern Drilling canceled a resale contract for the 7th generation ultra-deepwater drillship West Cobalt, which had been scheduled for delivery from DSME in 2021.
Northern Drilling said at the time the deal had been canceled for "various reasons including repudiatory breach of contract by DSME".
DSME then challenged Northern Drilling's move, and according to available info, it in December 2019 purported to terminate the contract owing the drilling firm's alleged failure to pay the remaining installments and for its breach of contract.
The yard reportedly said at the time it would pursue its legal and contractual rights in full, including its right to recover substantial damages.
Northern Drilling said earlier this year that the West Cobalt dispute was "not expected to be resolved in the near future."
The company had paid installments of $49.2 million at the time of rescission and further installments of $300.8 million would have become payable to DSME under the resale contract.
West Cobalt, previously known as Cobalt Explorer, was originally ordered by Vantage Drilling for scheduled delivery in 2015, but the order was canceled. Northern Drilling had exercised a $350 million option to acquire the drillship in April 2019.