Highlights of Seatrium million loss
The arbitration award received by MHWirth (MHW), a subsidiary of Akastor, from the tribunal in the dispute with Seatrium’s subsidiary Jurong Shipyard regarding the termination of four drilling rig unit contracts, is significant both financially and legally.
Financial Impact: MHWirth has been awarded $101 million as termination fees. This substantial amount will positively impact MHWirth's financial position and contribute significantly to Akastor's overall financial performance.
Reimbursement of Costs: In addition to the termination fees, MHWirth is eligible for reimbursement of legal costs and certain suspension costs, totalling approximately $7 million. This additional amount further enhances the financial recovery for MHWirth.
Interest: The award likely includes interest, accruing from the time of dispute to the date of the arbitration award. This adds another layer of financial benefit for MHWirth.
Legal Implications: The ruling from the arbitration tribunal, conducted under the rules of the Singapore International Arbitration Centre (SIAC), is binding and final. This underscores the legitimacy and enforceability of the decision, providing closure to the dispute.
Ownership and Corporate Structure: Notably, while MHWirth holds the drilling rig unit contracts, Akastor has a full financial interest in these contracts due to the structure of HMH Holding, a company formed through the merger of Baker Hughes’ Subsea Drilling Systems business and Akastor’s MHWirth. This context is crucial for understanding the financial impact on Akastor.
Strategic Considerations: The resolution of this dispute positively impacts Akastor's strategic position in the oil services industry. It validates the strength of Akastor's investments and subsidiaries in the offshore drilling equipment sector.
Next Steps: While the arbitration award is final, both parties have a limited window of 30 days to request corrections for any computational or clerical errors. This procedural step ensures the accuracy and completeness of the award.
Formation of HMH: HMH Holding was established through the merger of Baker Hughes’ Subsea Drilling Systems business and Akastor’s MHWirth. This merger aimed to create a global offshore drilling equipment company, with Baker Hughes and Akastor sharing equal equity in HMH.
Contract History: The drilling rig unit contracts in question were originally initiated in 2012 and subsequently terminated by Jurong in 2021 and 2022 after prolonged suspensions. These contracts were part of a larger arrangement between Jurong, Sete Brasil, and others in the offshore drilling sector.
Settlement Agreements: The drilling rig contracts were tied to agreements involving Sete Brasil. Notably, Jurong had previously reached a full and final settlement agreement with Sete Brasil in 2019, which likely influenced the termination and subsequent dispute resolution.
Arbitration Jurisdiction: The arbitration process was conducted under the rules of the Singapore International Arbitration Centre (SIAC), and the resulting award is deemed final and binding, barring any requested corrections within the stipulated timeframe.
Post-Award Procedures: Akastor has highlighted the possibility for either party to request corrections within 30 days of receiving the award, specifically targeting computational, clerical, typographical, or similar errors. This procedural step ensures the accuracy and integrity of the award's implementation.
Conclusion
The arbitration award signifies a significant financial outcome for MHW and by extension, Akastor. Beyond the awarded termination fees, the reimbursement of costs and accrued interest further solidifies the resolution of the dispute with Jurong Shipyard, ultimately contributing to the financial performance and stability of Akastor's subsidiaries within the offshore drilling industry.
Writen By: Ritika Gupta
Supervised By: Adv. Kalyan Krishna Bandaru
