Petrobras Council Greenlights Settlement Terms for Sete Brasil

The Board of Directors of Brazilian Oil and Gas Giant Petrobras Approved an Agreement with Sete Brasil Related to the Chartering of Four and Termination of Contracts for 24 Drilling Platforms

Petrobras reached a possible agreement with its compatriot Sete Brasil to charter four and terminate contracts for another 24 drilling platforms in February 2018. However, the agreement was subject to the approval of both companies.

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On Friday, December 20, 2019, Petrobras announced that its board approved the final terms of the contract with Sete Brasil, subject to the fulfillment of prior conditions.

The approved contract maintained the previously agreed and disclosed terms, including the maintenance of chartering and operating contracts for four platforms, with a duration of 10 years and a daily rate of US $ 299,000; termination of contracts established for the other 24 platforms; the removal of Petrobras and its subsidiaries from the shareholding structure of Sete Brasil and FIP Sondas, as well as the consequent termination of contracts incompatible with the terms of the contract.

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FIP Sondas is a private equity fund in Brazil, which holds 95% of the stake in Sete Brasil. The remaining 5% is held by Petrobras.

According to Petrobras, it will be the responsibility of Magni Partners, the winner of the Judicial Reorganization Auction of Sete Brasil, in partnership with Etesco, to charter and operate the remaining four platforms, still under construction.

Petrobras added that the signing of contracts formalizing the agreement would depend on compliance with the governance rules of Sete Brasil and other involved companies. The effectiveness of the contract and other contracts, in turn, will depend on the fulfillment of conditions that must occur over time, and this last must be implemented by June 30, 2020.

Before the approval of Petrobras’ board, Sete Brasil in October 2019 also reached agreements with Singapore platform builders Keppel Offshore & Marine and Sembcorp Marine related to contracts for the construction of six semi-submersible platforms and seven drillships, respectively.

Keppel entered into an agreement with Sete Brasil’s subsidiaries, including Urca, Frade, Bracuhy, Portogalo, Mangaratiba, and Botinas, regarding engineering, procurement, and construction contracts for the construction of six semi-submersible drilling platforms for these six subsidiaries of Sete Brasil.

Separately, Sembcorp Marine reached an agreement with Sete Brasil regarding a total of seven drillship contracts secured by its various subsidiaries of Sete Brasil. Under the agreement, all seven contracts were agreed to be terminated, and the parties agreed to mutually release each other from all claims related to the contracts.

For five of the seven drillships, it was agreed that Sembcorp Marine would retain all work performed. Regarding two of the seven drillships, which were the most advanced in construction, the titles of these works would be distributed between the shipyard and Sete Brasil proportionally to the payments made by Sete Brasil.

To remember, Sete Brasil was created in 2011 to build, own, and operate a fleet of drilling vessels in ultra-deep and semi-submersible waters to develop the pre-salt oil fields operated by Petrobras off the Atlantic coast of Brazil.

It was to be a project of 28 platforms, worth about US $ 90 billion in revenue. However, following a widespread corruption scandal in Brazil, involving Sete and Petrobras, Sete was unable to secure the necessary funding to pay for the platforms it had ordered from Sembcorp Marine and Keppel. Petrobras also refused to commit to the entire package of platform contracts.

In April 2016, Sete Brasil was forced to seek bankruptcy protection due to Petrobras’ hesitation in signing long-term contracts for the platforms ordered from the driller.