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Awilco Drilling Terminates Newbuild Contract And May Find Itself In A Lengthy Court Battle

Jun. 10, 2020 1:06 PM ETAwilco Drilling PLC (AWLCF)22 Comments
Vladimir Zernov profile picture
Vladimir Zernov


  • Awilco Drilling announces its decision to terminate the contract for its first newbuild rig.
  • The shipyard opposes the move and states that it is considering legal options.
  • If the dispute goes to court, Awilco will not see any money anytime soon even if it had the legal reasons to terminate the contract.

There’s a new twist in Awilco Drilling’s (OTC:AWLCF) story: the company decided to terminate the contract for its first newbuild rig. The official announcement is short, so I will quote it almost in full:

Awilco Rig 1 Pte. Ltd. (“AR1”), a wholly owned subsidiary of Awilco Drilling PLC (“Awilco Drilling”), has notified Keppel FELS Limited (“KFELS”) that is has exercised its contractual termination right under a newbuilding contract between KFELS and AR1 for the construction of a semi-submersible drilling rig, Nordic Winter, as a result of breaches under the Vessel Construction Contract. The vessel construction contract provides that on termination AR1 will be entitled to a refund of the instalments paid to KFELS of USD 54,720,985 plus accrued interest”.

This is a major development for Awilco Drilling which did not have the funds to finance the second installment and which was searching for funding alternatives. Here’s a slide on the company’s thoughts about financing the construction of the rig from the first-quarter presentation:

Source: Awilco Drilling

Apparently, the company came to the conclusion that raising capital in the current environment was not a viable alternative and found that KFELS breached the contract, providing an opportunity to get rid of the rig and get its money back.

In the same presentation, Awilco stated the following: “Slow progress on Nordic Winter in Singapore the last month due to governmental Covid-19 restrictions”.

Awilco’s press release did not specify what breaches were made by KFELS. The main question for investors and traders in this case is whether these breaches were due to coronavirus-related delays in construction, since KFELS may try to defend its position in court. In fact, it looks like KFELS will choose this route. Here’s the announcement from the shipyard:

Keppel FELS denies the allegations by Awilco in the Notice and

This article was written by

Vladimir Zernov profile picture
I'm a trader who trades both short-term and long-term. I started my career as a day-trader for a trading firm, but then turned to longer time frames and went on my own to manage my portfolio. I use technical analysis as well as fundamental analysis in my research.

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