Tullow Oil PLC (LON:TLW) has been ordered to pay fees to rig firm Seadrill in relation to a contract that was terminated in December 2016.
The payment comprises a contractual termination fee and other standby fees that accrued in the 60 days prior to termination of the contract – the fees are estimated at US$254mln, with Tullow liable for around US$140mln of the fees.
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Tullow told investors it expects to be required to pay the fees within the next 14 days, and, it noted that it had previously, in its 2017 results, made a provision of US$128mln in relation to the matter.
The judgement was made in the English Commercial Court with The Hon. Mr Justice Teare ruling that Tullow’s subsidiary was not entitled to terminate its West Leo rig contract with Seadrill by invoking the contract's force majeure provisions.
“Tullow is disappointed with the decision and maintains the view that it was right to terminate the West Leo contract for force majeure,” the company said in a stock market statement.
“Tullow will now examine its options, including seeking leave to appeal the judgment.”
The company also noted that its partner in Ghana, Kosmos Energy, is disputing separately, through an arbitration against Tullow with the International Chamber of Commerce, in relation to its 20% share of the liability of costs.