UMW Commences Arbitration as Frontier Breaches UMW Naga 7 Contract

Malaysia's UMW Offshore Drilling Sdn Bhd (UOD), a unit of UMW Oil & Gas (UMW O&G) Group of companies, disclosed that the firm has served a Notice of Arbitration Tuesday with the Singapore International Arbitration Centre (SIAC) on Philippines' Frontier Oil Corp. for damages and/or compensation for all loses incurred from the latter's breach of contract, not limited to the early termination fee of $19.2 million.

Both companies had entered into a drilling contract September 15, 2014, with UOD agreeing to provide a jackup, UMW Naga 7 (375' ILC), and other related services, including "to drill, deepen, side-track, workover, re-enter, tieback and any other such operations on a well until completion of each well as a producing well or have each well suspended, plugged and or abandoned," UMW O&G said in a filing with stock exchange Bursa Malaysia.

UOD revealed that under the contract, Frontier was to have arranged for a $5 million bank guarantee and an advance payment of $15 million on or before Dec. 15, 2014, ahead of the early commencement date on Jan. 15.

"Despite repeated reminders, the respondent (Frontier) has failed to, refused to and/or neglected to arrange for the said Bank Guarantee and Advance Payment."

Under the contract, termination shall be settled by final and binding arbitration in accordance with the SIAC, before one arbitrator to be appointed by the Chairman of SIAC, and that the place of arbitration shall be Singapore.

UMW Naga 7 had been scheduled to drill in the first quarter of this year in Service Contract 50 offshore north west Palawan in the Philippines.

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