John Fredriksen-backed Northern Drilling is set to appeal against an arbitration award it lost to South Korean shipbuilder Hanwha Ocean.
The Oslo-listed company said it would “seek leave to appeal” the awards on a “point of law” and to challenge the awards on grounds of “serious irregularity”.
“As a general rule, there are limited grounds to appeal arbitration awards, and permission of the court will be required for an appeal on a point of law to be made,” Northern Drilling chief executive Scott McReaken said.
“If the court grants permission to appeal the awards on a point of law, an appeal hearing will follow. However, no such permission is required to challenge the awards on grounds of serious irregularity,” he added.
Northern Drilling said it intends to raise capital through one or more equity placements to fund the appeal and challenge the awards.
“The first equity placement is expected to be in the range of $3m to $3.5m, but total funding needed to reach a conclusive outcome is expected to be significantly higher,” the company added.
Northern Drilling said the company holds no assets of significance other than its claims towards Hanwha and, therefore, does not see a value in its equity should the awards stand.
“Consequently, and in order to facilitate the required funding, the company will summon a special general meeting to reduce the par value of the company’s shares from $1.00 to $0.01,” it said.
Northern Drilling agreed to acquire the West Aquila and its sister rig, West Libra, in May 2018 for $296m per unit from former the Daewoo Shipbuilding & Marine Engineering, with $90m paid at the contract signing.
The initial contract had delivery dates of January and March 2021. However, the parties agreed on a flexible delivery schedule.
However, Northern Drilling cancelled the resale of the rigs in August and October 2021 due to what it described as a “delay of delivery as well as a repudiatory breach of contract”.
Fredriksen’s Seadrill originally ordered the pair in July 2013 for KRW 1.25trn ($1.16bn) but was later cancelled due to its restructuring.
In late September 2023, Northern Drilling lost the arbitration over the two cancelled drill ship newbuilding resale contracts, with the London tribunal finding in favour of the shipbuilder.
Arbitration has proven a mixed blessing for shipyards and drilling rig owners, with decisions often going either way.
In March 2021, Samsung Heavy Industries was ordered to pay Stena Drilling $411m after it lost at arbitration over a cancelled drill ship deal.
But SHI was on the winning side in October 2020 in a similar arbitration over Pacific Drilling’s disputed cancellation of its drill ship newbuilding.
Northern Drilling was set up in March 2017 to own offshore drilling rigs for operations in benign and harsh environments, including ultra deepwater environments.
