Court Rejects Eni's Attempt to End Drillship Contract


By MarEx 2018-01-22 19:25:00

Eni's multi-million-dollar suit against Transocean over the performance of the drillship Deepwater Pathfinder has ended in a $180 million judgement - against Eni. 

In 2013, Eni filed suit against Transocean, alleging that the Pathfinder's downtime exceeded industry standards and that Transocean hadn't been able to resolve the ship's problems. "Transocean misrepresented the vessel’s fitness and the efficacy of Transocean’s maintenance programs, breached its contractual warranties and covenants, and remains incapable of curing its breaches," Eni claimed in a court filing. 

The dispute started after a lengthly repair period. In 2010, Eni chartered the Pathfinder for drilling and workovers in the Gulf of Mexico. In May of that year the vessel had to put into port at Mobile, Alabama for 274 days of repairs. Eni alleged that after this long repair period, the vessel's equipment continued to suffer frequent breakdowns. 

In its response, Transocean said that the long maintenance period was not expected, and that new regulatory requirements increased the scope of work. The Deepwater Horizon spill occurred shortly before this shipyard period, and in the wake of the spill, the government implemented new requirements for third party certification and improvements to blowout preventers. In addition, Transocean said that it had made upgrades to the rig at Eni's request and had not charged its day rate during the shipyard period.

In February 2013, two years after the Pathfinder exited the yard and began work for Eni, the two companies began to dispute invoiced amounts for the Pathfinder's operations, specifically regarding day rate payments during repairs to the blowout preventer. Eni refused to pay certain invoices related to the time spent on these repairs. 

In October 2014, a further series of equipment failures related to the blowout preventer and the draw-works occurred. These problems happened during a particular market event: the offshore drilling industry was entering free-fall as oil prices plummeted, and upstream companies around the world began looking to cut costs. Eni attempted to terminate its contract with Transocean, citing maintenance problems.

However, Transocean did not agree that the termination was valid, and it continued to bill Eni at the contractual day rate through April 21, 2015, the date of the contract's end. In a counterclaim, Transocean sought unmet payments, interest, attorneys fees and all other damages available. Judge Alfred R. Bennett concurred and awarded Transocean a total of $185 million.

The 1998-built Deepwater Pathfinder has been in layup ever since the end of Eni's contract, and it is now awaiting demolition. Transocean announced in September 2017 that Pathfinder and five other idled rigs would be held for sale pending scrapping. “We continue to enhance the quality of our fleet through the addition of new, high-specification assets, and the retirement of older, less competitive rigs,” said Jeremy Thigpen, Transocean's president and CEO. The firm took a $1.4 billion writedown related to the vessels' disposal.