Beach to de­fend rig law­suit

The Advertiser - - BUSINESS -

BANK­RUPT US com­pany Di­a­mond Off­shore Drilling has sued Ade­laide-based oil and gas pro­ducer Beach En­ergy for abruptly ter­mi­nat­ing a $US65 mil­lion ($A101 mil­lion) drilling con­tract.

Beach En­ergy ended the agree­ment re­cently, claim­ing Di­a­mond Off­shore missed a “con­trac­tual mile­stone to de­liver the rig”, the con­tract driller said in a law­suit filed on Sun­day with the South­ern Dis­trict of Texas, Hous­ton.

Seek­ing the court to de­clare the ter­mi­na­tion no­tice in­valid, the Hous­ton-based com­pany, which filed for bank­ruptcy pro­tec­tion on Sun­day, said the

de­lay was “largely of Beach’s own mak­ing”.

It al­leged Beach En­ergy’s ac­tion pointed to an at­tempt to rene­go­ti­ate the deal “for more favourable terms”.

Beach yes­ter­day de­nied the al­le­ga­tion and said it “will de­fend

any claim that the con­tract was not validly ter­mi­nated”.

Un­der the drilling agree­ment, the rig would have been used to drill six wells over a year and Di­a­mond Off­shore stood to earn at least $US65 mil­lion. Di­a­mond Off­shore said it had spent more than $US100 mil­lion to pre­pare and trans­port the deep­wa­ter rig to ex­e­cute the drilling pro­gram in the Ot­way Basin off the Vic­to­rian coast to ful­fil the con­tract.

Beach an­nounced on April 20 it had ex­er­cised its right to ter­mi­nate the con­tract as the Ocean Onyx rig had ar­rived in Vic­to­rian state wa­ters in midApril, which the com­pany said was later than had been agreed.

It said last week it had “a good work­ing re­la­tion­ship with Di­a­mond” and yes­ter­day added that “de­spite the com­mence­ment of le­gal pro­ceed­ings Beach is en­gaged in with­out prej­u­dice dis­cus­sions with re­gard to the fu­ture op­er­a­tions of the Ocean Onyx rig and the Vic­to­rian Ot­way Basin off­shore drilling cam­paign.”

Di­a­mond Off­shore sought bank­ruptcy pro­tec­tion in Texas after it skipped an in­ter­est pay­ment and said it had re­tained re­struc­tur­ing ad­vis­ers.

Prices and de­mand for oil­field ser­vices have wors­ened since the price war be­tween Saudi Ara­bia and Rus­sia and a steep cut in oil de­mand caused by the coro­n­avirus pan­demic.

US oil prices nose­dived be­low $11 a bar­rel early yes­ter­day after a ma­jor ex­change­traded fund started sell­ing its short-term con­tracts of the com­mod­ity, and stor­age con­cerns mounted as the coro­n­avirus stran­gles de­mand.

West Texas In­ter­me­di­ate, the Amer­i­can bench­mark, for June de­liv­ery dropped 14.8 per cent to $US10.88 a bar­rel in Asian morn­ing trade – a day after plung­ing 25 per cent.

In­ter­na­tional bench­mark Brent crude slipped 4.4 per cent to trade at $US19.10 a bar­rel. Beach’s shares closed 2.5c lower at $1.32. The com­pany’s stock is more than 50 per cent down for 2020 amid a wider mar­ket down­turn.

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