Petroleum Africa
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Thursday, July 5, 2018
The case brought against Tullow Oil subsidiary, Tullow Ghana, in a British Commercial Court by Seadrill Ghana Operations did not go in the company’s favor. The UK firm announced that the court ruled that Tullow was not entitled to terminate its contract for the West Leo rig with Seadrill.
Tullow had invoked the contract’s force majeure provisions on December 4, 2016 but the court disallowed the provision. Tullow is now required to pay Seadrill a contractual termination fee and other standby fees that accrued in the 60 days prior to the termination of the contract.
These fees amount to approximately $254 million. Tullow expects to be required to pay these fees within the next 14 days with Tullow being liable for a net amount of around $140 million, which compares with the provision of $128 million made in the 2017 Annual Report and Accounts.
The company said it was “disappointed with the decision” and it maintains “the view that it was right to terminate the West Leo contract for force majeure”. Tullow will now examine its options, including seeking leave to appeal the judgment.
As disclosed in a recent trading statement, Kosmos is disputing separately, through an arbitration against Tullow with the Internatinal Chamber of Commerce, its share of the liability (c. 20%) of any costs related to the use of the West Leo rig beyond 1 October 2016. The arbitration tribunal’s decision is expected shortly.
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