Petrobras Pays 700 Million Dollars To Cancel Drilling Rig Contract

On Friday, June 21, Petrobras paid Vantage Drilling approximately US$ 690.8 million following a ruling in the Federal Court of Texas, United States.

According to the state-owned company, the payment does not end the litigation, as the Brazilian oil company appealed the decision, but it stops the accrual of interest on the judgment and allows for the lifting of precautionary asset freezes of the company and its subsidiaries in the Netherlands. Additionally, as part of the agreement, Petrobras America, a subsidiary of Petrobras, paid Vantage Deepwater Drilling, a wholly-owned subsidiary of Vantage, approximately US$ 10.1 million in connection with the related judgment concerning contractual damages and certain unpaid invoices related to work performed in the U.S. Gulf of Mexico in 2015.

In May 2019, U.S. district judge Alfred H. Bennett of the Southern District of Texas denied a request from Petrobras to void a judgment in the corruption lawsuit over a drilling services contract filed by U.S. companies Vantage Deepwater Company and Vantage Deepwater Drilling.

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The American court decision is appealable and relates to the cancellation of a rig contract due to a corruption scheme in Petrobras’ international board.

The irregularities in the drilling services contract were revealed by Operation Car Wash.

2008 Ruling

Last July, Petrobras lost a lawsuit for US$ 622 million, filed by the U.S. company Vantage Drilling International.

The contract between the two companies that generated the dispute is from 2009. In 2015, Petrobras notified Vantage that it had terminated the contract, claiming that the U.S. company had violated its terms. Vantage then filed a lawsuit alleging wrongful termination.

Vantage Drilling International was implicated in a 2015 complaint by the Federal Public Ministry in Paraná, as part of a Car Wash investigation into currency evasion stemming from a contract for the charter of a drilling ship. The contract was terminated in the same year.

Mr. Ihab Toma, President of Vantage, stated: “We are very pleased with Petrobras’ decision to make the payment of the arbitral award and the related judgment in the U.S. As always, we continue to focus on our business and providing the best service to our clients.”

In view of Petrobras’ parties retaining their rights, including the right to appeal the U.S. ruling, Petrobras’ parties may assert a claim against Vantage parties for the return of all or part of the payments made to satisfy the judgment in the event the U.S. ruling is overturned on appeal. The Company cannot provide any assurances regarding the final outcome of such appeals.

Additionally, the payment received by Vantage parties will be subject to reductions due to legal fees due and future (including, among others, a contingency fee equal to 10% of the amounts received from Petrobras parties) and any applicable taxes. Consequently, no assurance can be given regarding the amount of payments to be made by the Company.

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