Petrobras board gives green light for Sete Brasil settlement terms
- Exploration & Production
The board of directors of Brazilian oil and gas giant Petrobras has approved an agreement with Sete Brasil related to a charter of four and termination of contracts for 24 drilling rigs.
Petrobras reached a possible settlement with its compatriot Sete Brasil to charter four and terminate contracts for other 24 drilling rigs back in February 2018. However, the deal was subject to approval by both companies.
On Friday, December 20, 2019, Petrobras said that its board had approved the final terms of the agreement with Sete Brasil, subject to the fulfillment of the preceding conditions.
The approved agreement maintained the previously agreed and disclosed terms, including maintenance of charter and operating contracts for four rigs, effective for 10 years and daily rate of $299,000; termination of contracts entered into for the other 24 rigs; the removal of Petrobras and its subsidiaries from the shareholding structure of the companies of Sete Brasil and FIP Sondas, as well as the consequent termination of contracts not compatible with the terms of the agreement.
FIP Sondas is a private equity fund from Brazil, which holds a 95% interest in Sete Brasil. The remaining 5% is held by Petrobras.
According to Petrobras, it will be up to Magni Partners, the winner of the auction under the Judicial Reorganization of Sete Brasil, in association with Etesco, to charter and operate the remaining four rigs, still under construction.
Petrobras added that the signing of the contracts that would formalize the agreement would depend on compliance with the governance rules of Sete Brasil and other companies involved. The effectiveness of the agreement and other contracts, in turn, will depend on the fulfillment of conditions that must occur over time, and the latter should be implemented by June 30, 2020.
Before the approval by Petrobras’ board, Sete Brasil in October 2019 also reached agreements with Singapore’s rig builders Keppel Offshore & Marine and Sembcorp Marine related to contracts for the construction of six semi-submersible rigs and seven drillships, respectively.
Keppel entered into a settlement agreement with subsidiaries of Sete Brasil including Urca, Frade, Bracuhy, Portogalo, Mangaratiba and Botinas, in relation to the engineering, procurement and construction contracts for the construction of six semi-submersible drilling rigs for these six Sete Brasil subsidiaries.
Separately, Sembcorp Marine reached an agreement with Sete Brasil in relation to a total of seven drillship contracts secured by its various subsidiaries from Sete Brasil’s various subsidiaries. Under the settlement, all seven contracts were agreed to be terminated and the parties agreed to mutually release each other from all claims in relation to the contracts.
For five of the seven drillships, it was agreed that Sembcorp Marine would keep all works performed. In respect of two of the seven drillships, which had the most advanced construction progress, the titles to such works would be apportioned between the shipyard and Sete Brasil in proportion to payments made by Sete Brasil.
To remind, Sete Brasil was created in 2011 to build, own, and operate a fleet of ultra-deepwater drillships and semi-submersibles to develop the Petrobras-operated pre-salt oil fields off Brazil’s Atlantic coast.
This was supposed to be a 28-rig project worth about $90 billion in revenues. However, following a widespread corruption scandal in Brazil which involved both Sete and Petrobras, Sete failed to obtain the funds needed to pay for the rigs it had ordered from Sembcorp Marine and Keppel. Petrobras also refused to commit to the whole rig contract package.
In April 2016, Sete Brazil was forced to file for bankruptcy protection due to Petrobras’ hesitation to sign the long-term contracts for the rigs ordered from the driller.
Offshore Energy Today Staff
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