Pacific Drilling has confirmed that it will appeal last month’s arbitration decision over a cancelled newbuilding drilling rig.
In January an arbitration tribunal in London found in favour of Samsung Heavy Industries over an order placed in 2013 by Pacific Drilling.
The decision meant that the South Korean shipbuilder was in line to receive up to $320m in compensation over the failed deal.
“Under the rules governing the arbitration proceedings, Pacific Drilling has no automatic right to appeal and the grounds on which the High Court in London may grant permission to appeal are limited,” the company said.
“There can be no assurance that permission to appeal will be granted, or if granted, that the appeal will be successful.”
Pacific Drilling chief executive Bernie Wolford described the tribunal’s initial decision as “surprising and disappointing”.
Fearnleys Securities said the decision was a “big blow” for Pacific Drilling with the share price selling off by some 18%.
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”.
Samsung then took the case to the UK’s arbitration tribunal, claiming that Pacific Drilling’s cancellation was “an unfair practice”.
The shipbuilder has already received $180m in advanced payments, but the remaining amount for the contract is still outstanding.
The award does not include about $100m in interest and costs sought by Samsung, on which the tribunal reserved making a decision to a later date.
Following the tribunal’s decision Pacific Drilling said it expected to recognize a loss of about $225m during the fourth quarter of 2019, primarily related to the elimination of the Zonda receivable on the balance sheet.
