W&T offshore ordered to pay for Apache GoM dispute

U.S. Gulf of Mexico operator W&T Offshore has been ordered to pay more than $47 million to Apache over a dispute stemming back from 2014.

Apache filed a lawsuit against W&T Offshore on December 15, 2014, alleging that W&T breached the joint operating agreement related to the abandonment of deepwater wells in the Mississippi Canyon area of the Gulf of Mexico.

The dispute arose after Apache used drilling rigs instead of a previously contracted intervention vessel for the plugging and abandonment of three deepwater wells in the Mississippi Canyon area of the Gulf of Mexico, which W&T deemed excessive and unreasonable, and thus declined to pay the share of costs claimed by Apache.

A federal court jury in October 2016 awarded $43,2 million in favor of Apache, after finding that W&T Offshore breached its contractual obligation to pay its 49% share of the costs to plug and abandon three deepwater subsea oil and gas wells in the Gulf of Mexico. At the same time the jury found the penalty should be offset by 17 million as Apache had acted in bad faith, thereby causing W&T Offshore to not comply with the contract.

However, W&T Offshore said on Thursday it had received a final trial court judgment from the U.S. District Court for the Southern District of Texas directing the company to pay Apache Corp. $43.2 million, plus $4.4 million in prejudgment interest, attorney’s fees and costs assessed in the judgment.

“W&T has contended that the costs to use the drilling rigs were unnecessary and unreasonable but that Apache chose to use the rigs without W&T’s consent because they otherwise would have been idle at Apache’s expense. W&T believes the use of the rigs was in bad faith, as found earlier by the jury, and in breach of the applicable joint operating agreement, particularly since another vessel had been contracted by Apache for the abandonment a year in advance, the company said.

W&T Offshore had previously paid $24.9 million as an undisputed amount for the plug and abandonment work.

Tracy W. Krohn, W&T Offshore’s Chairman and Chief Executive Officer, stated, “W&T is disappointed in the judgment signed by the district court and believes that it is contrary to the applicable law given the jury’s finding in October 2016 that Apache acted in bad faith. W&T is considering its options, including post judgment motions and appeal.”

Offshore Energy Today Staff