Offshore drilling rig owner Northern Drilling said Thursday it would appeal an arbitration tribunal ruling from September, which ruled in favor of South Korea's Hanwha and against Northern Drilling in a case over drillship order cancellations.
Billionaire John Fredriksen-owned offshore drilling company Northern Drilling canceled the West Aquila and West Libra drillship orders with South Korea's Daewoo Shipbuilding & Marine Engineering in 2021, citing delay of deliveries as well as a repudiatory breach of contract, and said it would seek a refund for installments paid. It also said that "if this claim is disputed, the company will seek an award via London arbitration."
Northern Drilling had signed agreements with DSME back in May 2018, to buy the two newbuilding 7th generation DP3 and ultra-deepwater drillships from DSME for $296 million each.
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.
In a statement on September 25, announcing the arbitration tribunal ruling, Northern Drilling said: "Today, the company has received the arbitration awards from the tribunal, which have been found in favor of Hanwha." Northern Drilling said that the tribunal had dismissed its claims and that Hanwha’s claims against its West Aquila Inc. and West Libra Inc. subsidiaries—through which it had ordered and then canceled the rigs—for losses arising from the terminations, interest, and that costs would be determined at a future hearing.
The Appeal
In a statement on Thursday, October 19, Northern Drilling said: "The company has decided to seek leave to appeal the awards on a point of law and to challenge the awards on grounds of serious irregularity."
"As a general rule, there are limited grounds to appeal arbitration awards, and permission of the court will be required for an appeal on a point of law to be made. If the court grants permission to appeal the awards on a point of law, an appeal hearing will follow. However, no such permission is required to challenge the awards on grounds of serious irregularity," Northern Drilling said.
Northern Drilling said it required funding to appeal and challenge the awards, and intended to raise capital through one or more equity placements as further developments are made in the appeals process.
"The first equity placement is expected to be in the range of USD3-3.5M, but total funding needed to reach a conclusive outcome is expected to be significantly higher," Northern Drilling said.
"The company holds no assets of significance other than its claims towards Hanwha, and therefore does not see a value of its equity should the awards stand. Consequently, and in order to facilitate the required funding, the company will summon a Special General Meeting to reduce the par value of the company’s shares from USD 1.00 to USD 0.01. Future equity raises are expected to be done at or close to the new par value of the shares. The company will in due course inform the markets on its planned financing activities and the further development of the appeals process," Northern Drilling said.
Worth noting, one of the two drillships mentioned earlier, the West Aquila, has since been acquired by the offshore drilling company Transocean and renamed to Deepwater Aquila. Transocean recently said it had secured a three-year contract for the newbuild ultra-deepwater drillship "a national oil company" for work offshore Brazil. Transocean this week confirmed Petrobras as the client who rented the drillship.