Oil and gas company Niko Resources has reached a settlement agreement with offshore drilling contractor Diamond Offshore over drilling contracts for the pair of semi-submersible rigs Ocean Lexington and Ocean Monarch.
Niko hired Diamond’s semi-sub Ocean Monarch in 2011 for a four-year term with the option of one additional year. The contract started in 2012 and the rig was used for drilling operations offshore Indonesia. The Ocean Lexington was awarded a 477-day job in Trinidad in 2012.
In December 2013, as part of its financial restructuring, Niko entered into an agreement with Diamond Offshore relating to the termination of the Ocean Monarch rig agreement including settlement of the company’s payment obligations and other commitments under drilling contracts for the semi-submersible drilling rigs Ocean Lexington and Ocean Monarch.
The settlement agreement included a mutual release of claims in respect of Niko’s payment obligations to be released upon payment by the company of $80 million to Diamond Offshore. Diamond got $25 million in the fourth quarter of 2013 and received a cash payment of $20.3 million during 2014. Niko was further obligated to make periodic payments totaling an aggregate of $34.8 million, payable at various times through December 2016.
Starting on June 30, 2015, Niko has not made scheduled payments under the terms of the Diamond settlement agreement, with unpaid amounts totaling $20 million as at March 31, 2016.
In July 2015, Diamond filed a lawsuit in a court in Texas seeking to enforce certain obligations. In May 2016, the Texas court issued a summary judgment in the amount of $20 million plus interest and legal costs, and, in June 2016, Diamond filed a lawsuit in a court in Alberta seeking to enforce the summary judgment of the Texas court.
Niko & Diamond make peace
Following the three-year-long dispute, Niko Resources said on Tuesday it has executed an agreement with subsidiaries of Diamond Offshore relating to the settlement of outstanding claims under drilling contracts and the Diamond settlement agreement executed in December 2013, including related judgments granted by courts in Texas and Alberta, in compliance with the terms of the previously disclosed amended and restated facilities agreement.
Under the 2016 settlement agreement, in exchange for full and final mutual releases of outstanding claims under the drilling contracts and the 2013 settlement agreement, including related judgements, Niko has: agreed to make future payments to Diamond equal to 20 percent of amounts to be retained by Niko pursuant to the waterfall distribution under the terms of the amended and restated facilities agreement, subject to a cap; paid to Diamond a cash settlement amount; and assigned to Diamond a portion of potential contingent payments under the previously announced sale agreement for Niko’s interest in five Indonesian production sharing contracts.
Robert S. Ellsworth Jr., interim Chief Executive Officer of Niko, said: “The settlement agreement with Diamond represents another important step in advancing the company’s strategic plan to maintain its core assets for a period of time with the goal of enhancing value and ultimately monetizing these assets for the benefit of the company’s stakeholders.”
Offshore Energy Today Staff