Diamond, Petrobras settle lawsuit over early rig contract termination
- Exploration & Production
Offshore driller Diamond Offshore and Brazilian oil company Petrobras have settled a lawsuit related to an early rig contract termination back from 2016.
In August 2016, Diamond Offshore Drilling received notice of termination from Petrobras of its drilling contract on the Ocean Valor semi-submersible drilling rig. The drilling contract was originally estimated to conclude in accordance with its terms in October 2018.
Diamond then filed a lawsuit against Petrobras in the 17th Lower Court of Rio de Janeiro Central District.
In September 2016, the presiding judge in the case issued a preliminary injunction, suspending Petrobras’ termination of the contract and ordering that the contract remain in effect until the end of the contract term or further court order. As a result of the injunction, which was upheld on appeal in March 2017, the contract has remained in effect and has not been terminated.
According to Diamond Offshore’s SEC filing, on January 4, 2018, Diamond and Petrobras agreed to settle the lawsuit and amend the Ocean Valor drilling contract. Among other things, the amendment provides for the rig to be in an extended standby period retroactively from July 2017 to the end of September 2018 at a rate equal to approximately $190,000 per day and then for the rig to continue under contract with Petrobras for an extended period through the end of September 2020 at a rate equal to approximately $289,000 per day.
Diamond’s financial results for the quarterly period ending December 31, 2017 will include a one-time charge of approximately $20 million for the estimated retroactive adjustment to reflect the discounted standby dayrate earned by the Ocean Valor during the previously-reported quarterly period ended September 30, 2017.