Vantage Drillings 2013-built Tungsten Explorer. Photo: Vantage Drilling
Daewoo Shipbuilding & Marine Engineering Co., the world’s number two shipbuilder, says it has cancelled a 703.4 billion won ($595 million) drillship order from a U.S. customer after the customer failed to make an interim payment.
The cancellation was announced by DSME in a stock filing on Wednesday, which did not specify the client or drillship.
The drillship in question however is the Cobalt Explorer, which was ordered by Houston-based offshore drilling contractor Vantage Drilling. In an SEC filing released by Vantage Drilling last week, the company said that it terminated the contract for the construction and sale of the drillship pursuant to the terms of the contract and that the company would seek to recover all funds paid to the shipyard totaling approximately $59.5 million.
“The shipyard may seek to challenge our ability to terminate the contract pursuant to arbitration provisions in the contract, which would result in a delay in recovery of any amounts that might be due to us under the contract,” Vantage Drilling said in its filing released August 13. “In addition, the shipyard itself may seek to terminate the contract for our failure to make the second milestone payment for the Cobalt Explorer under the contract. Such termination by the shipyard might entitle the shipyard to retain all supplies delivered to the shipyard and all milestone and other payments made by us to the shipyard to date, and to elect to sell the vessel and claim any deficiency in proceeds against us.”
Vantage Drilling added that it may consider future alternatives with DSME for the delivery of the Cobalt Explorer, however no assurances can be made.
Earlier this year, Vantage Drilling said that it amended the terms of the terms of the contract for the Cobalt Explorer to defer the second progress payment until July 2015, which is presumably the payment that was missed.
Cobalt Explorer was supposed to be delivered by the end of this year. It is a 7th generation, dual-activity ultra-deepwater drillship equipped with two seven-ram BOP’s and 10,000 feet of riser.
DSME reportedly plans to continue building the ship and will try to find a new buyer.
Vantage Drilling’s fleet currently consists of three modern ultra-deepwater drillships and four jack-ups drilling rigs.
The drillship cancellation is the latest setback for DSME sparked by the downturn in the offshore oil and gas industry. Earlier this week, it was announced that 13 DSME executives and advisors had announced their resignation amid a restructuring of the company after DSME posted its biggest quarterly loss in Q2. The restructuring is said to include the sale of non-core businesses and assets.
On Wednesday, shares of DSME fell to their lowest price in more than 13 years in Seoul trading on concern that its liabilities outpace assets.
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