Beach to defend rig lawsuit
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.