You are here

Keppel reaches settlement with Sete Brasil over 6 long-standing rig orders

Sete Brasil semi - Urca.JPG
As part of the settlement, Keppel O&M will have full ownership over the four uncompleted rigs to explore various options to extract the best value from the assets. Keppel O&M is also in discussions with Magni Partners on the terms to complete the construction of the drilling rigs Urca (pictured above) and Frade, which are about 92 per cent and 70 per cent completed respectively.

KEPPEL Corporation's offshore and marine unit has reached a long-awaited settlement agreement with Sete Brasil, its former biggest customer now under bankruptcy protection, over six uncompleted oil drilling rigs.

A Keppel Offshore & Marine (Keppel O&M) unit will take control of four uncompleted rigs and is in discussions to complete  the building of two remaining rigs, Keppel said in a bourse filing on Monday. 

Keppel had received US$1.3 billion in progress payments from Sete Brasil for the six rig orders, which had a total contract value of about US$4.9 billion, before payments stopped in November 2014. Keppel stopped work on the rigs in late 2015.

For four rigs, the engineering, procurement and construction contracts and related agreements entered into with Sete Brasil subsidiaries will be deemed to be amicably terminated, with no penalties, refunds and/or any additional amounts being due to any party. Both side have also waived all rights to any claims.

sentifi.com

Market voices on:

Of those four rigs, work on one is 40 per cent completed, a second is 21 per cent finished while the other two are below 10 per cent completed.

When the settlement agreement takes effect, Keppel O&M unit Fernvale will have full ownership of the four rigs, and will explore various options to extract the best value from these assets, Keppel said.

For the two remaining rig orders, a total sum of close to US$260 million will be recognised as part of the undisputed debt included in debt-ridden Sete Brasil’s court-approved restructuring plan. The amount will be paid to Fernvale proportionally and on equal footing with the other creditors of the Sete Group. 

Fernvale is also in discussions with Magni Partners (Bermuda) Ltd on the terms to complete the construction of the two drilling rigs, which are about 92 per cent and 70 per cent completed respectively for Sete Brasil units Urca and Frade. Magni Partners' winning bid to purchase four Sete Brasil subsidiaries, including Urca and Frade, was approved at a meeting of Sete Brasil's creditors on Oct 3, said Keppel.

The settlement agreement was also approved at this meeting. Keppel noted that the agreement will only become effectiveupon the fulfilment of other conditions precedent, including the successful sale of Urca and Frade by Sete Brasil to Magni Partners.

"When the settlement agreement becomes effective, Keppel O&M would be able to resolve a long outstanding issue related to the six rigs, and look forward to exploring other opportunities to contribute to the oil and gas industry in Brazil," said Keppel.

Keppel O&M agreed in late 2017 to pay fines amounting to US$422.2 million with criminal authorities in the United States, Brazil and Singapore in relation to bribes made by a former agent in Brazil to win 13 contracts with state oil giant Petrobras and its main rig supplier Sete Brasil.

Sete Brasil had previously awarded some US$10 billion worth of rig-building contracts to Keppel O&M and fellow Singapore O&M heavyweight Sembcorp Marine.

In its 2017 fourth-quarter financial results, Keppel Corp booked a further S$81 million provision for losses made on its Sete Brasil rig-building projects on top of a previous S$230 million provision announced in Q4 2015.

Following the settlement announcement, Keppel Corp shares traded up S$0.06 or 1 per cent to S$5.87 as at 10.16am.