Pacific Drilling has been denied an application to have an arbitration decision over a cancelled newbuilding drilling rig overturned.
The New York-listed company gave few other details in a statement that consisted of just two paragraphs and was released after trading hours.
Earlier this year an arbitration tribunal in London found in favour of Samsung Heavy Industries over an order placed in 2013.
Pacific Drilling ordered the Pacific Zonda in 2013, but later notified Samsung that it would cancel the $517m order, claiming that the yard had “delayed the construction process and was unlikely to meet the delivery deadline”.
The decision meant the South Korean shipbuilder was due up to $320m in compensation over the failed deal.
However, the award does not include a further $100m in interest and costs sought by SHI, on which the tribunal has still to make a decision.
In February, Pacific Drilling confirmed it would appeal the decision describing it as “surprising and disappointing”.
However, it did warn investors there were “no assurances” that permission to appeal will be granted, or if granted, that the appeal will be successful.
At the time of the original decision, Oslo-based analysts described the arbitration decision as a “big blow” for Pacific Drilling.
No assurances
The $517m drillship newbuilding was originally due to be delivered in March 2015, but by that October Pacific Drilling exercised its right to terminate the contract over SHI’s “failure to timely deliver the drillship in accordance with the contractual specifications”.
The shipbuilder rejected the decision, and in November 2015, formally started proceedings in London under the Arbitration Act 1996 before a tribunal of three arbitrators.
SHI has already received $180m in advanced payments, but the remaining amount for the contract is still outstanding.
This week, Fearnley Securities said Pacific Drilling was facing the prospect of filing for Chapter 11 after missing interest payments on its debts.
The Oslo-based bank’s high-yield analysts said this was a “clear indicator” that Pacific Drilling’s $1.1bn in debt was “set to be restructured”.
Pacific Drilling has a fleet of seven high-end drillships — three seventh generation and four sixth generation designs — all built by SHI between 2011 and 2014.
Two of the vessels — the Pacific Scirocco and the Pacific Mistral (both built 2011) — have been stacked since 2017 and 2015, respectively.
