Sembcorp Marine joined Keppel Corp in announcing a long-awaited settlement with Sete Brasil for rig-building contracts worth billions of dollars that were frozen after the Brazilian company was forced to file for bankruptcy amid a sweeping corruption probe.
In December 2011 Keppel Offshore and Marine received a letter of intent from SETE Brazil for the construction of one DSS semi-submersible. This was followed in April 2012 by a new letter of intent for five additional units.
In August 2012 Semcorp Marine received an order from SETE Brazil for seven Jurong Espadon ultra-deepwater drillships.
Keppel Offshore & Marine’s wholly owned subsidiaries, Fernvale and FELS Offshore, have 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 (EPC Contracts) for the construction of six semisubmersible drilling rigs for these six Sete Brasil subsidiaries.
As part of the Settlement Agreement, Fernvale will take over ownership of the uncompleted rigs which arose from the performance of the EPC Contracts with Bracuhy, Portogalo, Mangaratiba and Botinas. The EPC Contracts and related agreements entered into with these four subsidiaries will be deemed to be amicably terminated, with no penalties, refunds and/or any additional amounts being due to any party, and the parties will waive all rights to any claims.
The works done under the EPC Contracts with Bracuhy and Portogalo are about 40% and 21% completed respectively, while those for Mangaratiba and Botinas are below 10%.
When the Settlement Agreement comes into effect, Fernvale will have full ownership over the four uncompleted rigs, and will be able to explore various options to extract the best value from these assets.
As for the rigs under construction for Urca and Frade, a total sum of close to US$260m will be recognised as part of the undisputed debt included in Sete Brasil’s court-approved Judicial Reorganisation Plan. The outstanding amount will be paid to Fernvale proportionally and pari passu with the other creditors of the Sete Group as part of, and out of the proceeds of, its Judicial Reorganisation Plan.
Semcorp Marine said its seven drillship contracts with Sete Brazil subsidiaries worth a total US$5.6 billion will be terminated and the parties will mutually release each other from all claims in relation to the contracts. This is subject to certain prior conditions being fulfilled. The company previously received some $2.70 billion in progressive payments for the work performed on these projects, up until November 2014 when Sete Brasil was unable to continue with the payments.
For five of the seven drillships, Sembcorp Marine will keep all works performed.
The remaining two have made the most construction progress, and will be split between Sembcorp and Sete Brasil in proportion to payments already made by Sete Brasil. Sete Brasil has identified a buyer for its units that own the two drillships. The buyer is expected to negotiate with Sembcorp to enter new contracts to complete the drillships.
(Sources: Sembcorp Marine/Keppel O&M/Business Times)