SINGAPORE (THE BUSINESS TIMES) - A wholly-owned unit Oslo-listed Awilco Drilling is purporting to terminate a US$425 million (S$590.3 million) offshore rig construction contract with Keppel FELS, due to alleged breaches of contract.
Keppel FELS on June 8 received a notice of termination from Awilco Rig 1 (AR1) for the Nordic Winter rig.
AR1 is alleging certain breaches relating to the project management, schedule, resourcing and compliance, Keppel Corp said in a bourse filing.
The notice of termination came one day before AR1 was due to pay its next instalment of nearly US$31.9 million under the contract on June 9, Keppel Corp noted. This payment instalment had been deferred in March 2020 at AR1's request.
Under the terms of the contract, an effective termination of the contract by AR1 might entitle it either to the return of payments already made - totalling about US$54 million - plus accrued interest, or to pay for the work done by Keppel FELS and take over the rig.
"Keppel FELS denies the allegations by Awilco in the notice and has rejected the purported termination of the contract," Keppel Corp said on Tuesday.
Keppel FELS is considering its legal options and evaluating the potential financial impact in consultation with its advisers.
The company has further reserved all its rights under the contract, including the right to retain the instalments already received and to seek compensation for the work done to date, in the event that AR1 defaults on the payment of the June 9 instalment.
Keppel Corp will provide updates on material developments on the matter.
The conglomerate announced on March 11, 2018 that Awilco had awarded Keppel FELS the US$425 million contract to build a mid-water semi-submersible drilling rig for harsh environment use.
Under the contract, Keppel FELS would complete the construction of the Nordic Winter rig in the first quarter of 2021.
Nordic Winter is one of two semi-submersible drilling rigs of the same design ordered by Awilco from Keppel FELS.
The second rig, Nordic Spring, was ordered in March 2019 when Awilco exercised one of the three options which had been extended by Keppel Corp's offshore and marine arm in March 2018.
The repeat newbuild order is also worth about US$425 million, and is scheduled to be completed in the first quarter of 2022.
The construction of the second rig continues according to its contract, an Awilco spokesperson told Offshore Engineer magazine on Monday.
Shares of Keppel Corp dropped $0.07 or 1.1 per cent to end Monday at $6.23 on an ex-dividend basis.