Shanhaiguan New Shipbuilding Industry hit by Falcon Energy rig cancellations

Singapore-listed offshore services provider FEG had in 2013 entered into the four construction contracts with the Chinese shipbuilding via its then subsidiary and now an associate firm FTS Derricks.

The four Gusto MSC CJ46 jack-up rigs were valued at a total of $872m and were designed to work in water depth up to 425 feet and to drill up to 35,000 feet depth. The contract had come with an option to build two more sister units.

FEG said the company had given four performance guarantees of $784.8m for the due and punctual payment by FTS Derricks of the final instalment of the contract price payable by FTS Derricks upon delivery of each rig.

“The performance guarantees for three of the four rigs amounting to $588.6m given by the company have become no longer of effect as the builder and FTS Derricks have each respectively exercised its rights under the three relevant construction contracts to terminate the said contracts,” FEG stated.

“Matters concerning the construction contract for the fourth rig are currently under discussion with the builder. The management of the company expects this to come to a conclusion shortly,” it added.

Shanhaiguan New Shipbuilding Industry is currently 100% owned by Dalian Shipbuilding Industry Co, which in turn is a subsidiary of China Shipbuilding Industry Corp (CSIC).