Offshore drilling contractor Vantage Drilling returned to quarterly profit on the back of drilling contract termination revenue received from Petrobras.
Vantage Drilling on Wednesday reported net income attributable to controlling interest of approximately $590.7 million for the second quarter of 2019 compared to a net loss attributable to controlling interest of $31.1 million for the second quarter of 2018.
The company said that the net income stems from the recent payments by Petrobras Venezuela of approximately $690.8 million to Vantage Deepwater Company, one of Vantage’s subsidiaries (VDEEP), and by Petrobras America, Inc. of approximately $10.1 million to Vantage Deepwater Drilling, Inc., also one of Vantage’s subsidiaries (VDDI).
The payments were made pursuant to an agreement between the parties and in satisfaction of the previously rendered arbitration award and related U.S. judgment confirming the award.
The dispute arose following the Petrobras’s parties’ termination of the agreement for the provision of drilling services for the Titanium Explorer dated February 4, 2009 between PVIS and VDEEP and which had been novated to PAI and VDDI.
The Petrobras parties claimed the Vantage parties had breached their obligations under the drilling contract. The Vantage parties immediately filed the international arbitration claim against PAI, PVIS, and Petrobras, claiming wrongful termination of the drilling contract.
In July 2018, the international arbitration panel ruled in favor of the Vantage entities, rendering an arbitration award of $622 million plus interest against PVIS, PAI and Petrobras. In May 2019, the U.S. District Court for the Southern District of Texas confirmed the arbitration award and denied the Petrobras parties’ petition to vacate the award.
The Petrobras parties filed their notice of appeal to the U.S. Court of Appeals for the Fifth Circuit seeking the reversal of the U.S. judgment. The Vantage parties believe there is no basis for reversal and intend to vigorously contest the appeal.
The second quarter of 2019 includes drilling contract termination revenue of approximately $594 million and interest income of approximately $106.9 million associated with the payments, together with related legal contingency fee and income taxes.
Adjusting for these items, pro-forma net loss for the three months ended June 30, 2019 was approximately $37.4 million or $7.41 per share.
The company recorded revenues of $636.4 million in 2Q 2019 compared to $60.5 million in the same period last year.
When it comes to Vantage’s drilling rigs utilization, deepwater rigs saw a decrease in utilization from 63.2% in 2Q 2018 to 49.2% in 2Q 2019 while the jack-up rigs’ utilization increased from 88.5% in 2Q 2018 to 93.7% in 2Q 2019.
Offshore Energy Today Staff
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