John Fredriksen-backed Northern Drilling has cancelled the resale contract of a second drillship on order at Daewoo Shipbuilding & Marine Engineering (DSME).
The company said it had called off the deal for the West Libra due to a "delay of delivery as well as repudiatory breach of contract".
Northern Drilling subsidiary West Libra Inc said it had made advance payments totaling about $90m to DSME.
It aims to claim a refund of the money paid, plus interest and damages. If the claim is disputed, it will seek an award via London arbitration.
In August, Northern Drilling cancelled the resale contract of the newbuild drillship West Aquila from DSME for similar reasons.
Mixed blessing
However, DSME has initiated arbitration proceedings, Northern Drilling said.
Arbitration has proven a mixed blessing for shipyards and owners with decisions often going either way.
In March, Samsung Heavy Industries was ordered to pay Stena Drilling $411m after it lost at arbitration over a cancelled drillship deal.
But SHI was on the winning side in October 2020 in a similar arbitration over Pacific Drilling’s disputed cancellation of its drillship newbuilding.
Northern Drilling agreed to acquire the West Aquila and its sister rig West Libra in May 2018 for $296m per unit, with $90m paid at the contract signing.
The initial contract had delivery dates of January and March 2021. However, the parties agreed a flexible delivery schedule.
The pair were originally ordered by Fredriksen’s Seadrill in July 2013 for KRW 1.25trn ($1.16bn) but were later cancelled due to its restructuring.
Northern Drilling was set up in March 2017 for the purpose of ownership of offshore drilling rigs for operations in benign and harsh environments, including ultra-deep-water environments.
Opportunistic strategy
The company's strategy is to be a distressed asset play on a recovery in the offshore drilling market. It said it has an opportunistic growth strategy and is targeting acquisitions of any offshore drilling rig that represents an attractive purchase price compared with replacement cost and future earnings capacity.
DSME is also looking to find a solution for two drilling rigs ordered by Valaris — the world’s largest offshore drilling contractor — in 2013 at a cost of $1.2bn.
Earlier this year, the companies reportedly agreed to push back a September 2021 delivery deadline for the rigs to the end of 2023.
