PGS Clarifies on New Builds and Charter Contracts with Arrow, WesternGeco
Following speculations in the market, PGS finds it appropriate to clarify certain facts relating to termination rights in the contracts governing the building of new builds 532 and 533 at Factorias Vulcano in Spain and the contracts governing the charter parties between Arrow and WesternGeco.
After amendments made during 2008, the shipbuilding contacts with the yard sets out delivery times of November 30, 2008 and March 31, 2009 for New builds 532 and 533 respectively. According to the same shipbuilding contracts Arrow is entitled to terminate the shipbuilding contract if the relevant vessel is not delivered within 120 days of the said delivery date. While the vessels are delayed and there is risk of further delay, Arrow does not have a basis for termination as of today.
PGS has earlier informed the market that the shipbuilding contacts with the yard and the contracts governing the charter parties with WesternGeco are designed to be back to back. If either New build 532 or 533 are delayed with more than 120 days, Arrow will have to notify WesternGeco that Arrow has a right to terminate the shipbuilding contract with the yard. WesternGeco may then decide to terminate the charter party and any related agreements with Arrow or they may instruct Arrow not to terminate the shipbuilding contract. Only if WesternGeco in such a situation decides to terminate the charter party and any related agreements may Arrow choose to terminate the relevant shipbuilding contract.
For New builds 532 and 533, Arrow has made all contractual payments to the yard, except the final installments (EUR 36 million per vessel) due on delivery. If either of the New builds 532 and 533 are more than 120 days delayed and both WesternGeco and Arrow should decide to terminate the contracts related to that relevant vessel, Arrow would be entitled to repayment from the yard of all installments made on such vessel, which amounts to EUR 39 million per vessel, of which EUR 32 million is secured by on-demand refund guarantees.
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