SINGAPORE (Oct 7): Keppel Offshore & Marine (Keppel O&M) has finally reached a settlement with Sete Brasil over the long outstanding issue surrounding the construction of six semisubmersible drilling rigs.
Keppel O&M announced Monday that wholly-owned subsidiaries Fernvale and FELS Offshore have entered into a settlement agreement with subsidiaries of Sete Brasil, including Urca, Frade, Bracuhy, Portogalo, Mangaratiba and Botinas.
The settlement agreement is in relation to the Engineering, Procurement and Construction (EPC) contracts for the construction of six semisubmersible drilling rigs for these six Sete Brasil subsidiaries.
As part of the agreement, Fernvale will take over ownership of the uncompleted rigs which arose from the performance of the EPC contracts with Bracuhy, Portogalo, Mangaratiba and Botinas.
The EPC contracts and related agreements entered into with these four subsidiaries will be deemed to be amicably terminated, with no penalties, refunds and/or any additional amounts being due to any party. The parties will also waive all rights to any claims.
The works done under the EPC contracts with Bracuhy and Portogalo are about 40% and 21% completed respectively, while those for Mangaratiba and Botinas are below 10%.
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When the settlement agreement comes into effect, Fernvale will have full ownership over the four uncompleted rigs.
In a bourse filing on Monday before market open, Keppel O&M says the company will then be able to explore various options to extract the best value from these assets.
As for the rigs under construction for Urca and Frade, a total sum of close to US$260 million ($358 million) will be recognised as part of the undisputed debt included in Sete Brasil’s court-approved Judicial Reorganisation Plan.
The outstanding amount will be paid to Fernvale proportionally and pari passu with the other creditors of the Sete Group as part of, and out of the proceeds of, its Judicial Reorganisation Plan.
In a meeting on Oct 3, the creditors had approved the settlement agreement as well as the winning bid proposal for Magni Partners (Bermuda) to purchase four Sete Brasil subsidiaries, including Urca and Frade.
The settlement agreement will only become effective upon the fulfilment of other conditions precedent, including the successful sale of Urca and Frade by Sete Brasil to Magni Partners.
Separately, Fernvale is in discussions with Magni Partners on the terms to complete the construction of the drilling rigs contracted with Urca and Frade, which are about 92% and 70% completed respectively.
Keppel O&M says it looks forward to exploring other opportunities to contribute to the oil and gas industry in Brazil, after resolving this long outstanding issue when the settlement agreement becomes effective.
It adds that further announcements will be made when all the conditions precedent have been fulfilled and the settlement agreement has become effective.
The company says the settle agreement is not expected to have a material impact on the net tangible assets or earnings per share of parent company Keppel Corporation for the current financial year.
Shares in Keppel Corp closed 6 cents lower, or down 1.0%, at $5.81 on Friday.
