Providence Loses Transocean Day Rate Appeal
The Irish oil firm Providence Resources has lost an appeal in a suit brought by Transocean over $19 million in unpaid day rate charges on the GSF Arctic III semi-submersible.
An initial court ruling found that Transocean had been in breach of contract for failure to properly maintain subsea equipment, and allowed Providence to offset Transocean's claim by the amount of alleged losses suffered due to the breach.
But in a final ruling, an appeals court in London found that Providence could not set off consequential losses following from Transocean's actions (though Providence noted that the court did not reverse the earlier decision finding that Transocean was in breach of contract).
"Providence estimates the financial implications of the Court of Appeal's judgment will result in the payment of approximately US$7 million . . . The parties and their legal advisors are currently in the process of agreeing the final amount payable," Providence said in a statement. "Pending clarification of such matters, and having regard to [our] existing financial resources, [Providence] has requested the continued suspension of its shares from trading" on the London and Irish exchanges.
Providence's request to suspend trading was made before the announcement of the final court decision, and at the time of suspension its shares were listed at about 14 pence sterling ($0.20). In mid-2013 it was trading in the range of $8.50.
Providence suggested that it may have to borrow to finance the court judgement. "The Company is in active discussions with its financial advisors and current debt provider with the objective of ensuring that the Company has the appropriate financial resources to satisfy its obligations to Transocean," it said.
Separately, in February Providence suggested that it was considering drilling a test well at its Barryroe field offshore Ireland – the same block that Transocean had been contracted to work in 2011/2012 with the Arctic III. It estimated the cost at $23 million, down by half from prior years due to service price cuts from the oil downturn, and said that four financially capable firms had an interest in sharing the risk and the work to explore the prospect. Providence also expressed an interest in farming out the development of its other E&P lease blocks.