Keppel FELS terminates US$425m contract with Awilco Drilling unit

GLOBAL offshore group Keppel FELS has terminated a US$425 million contract from Awilco Drilling to build a mid-water drilling rig, the mainboard-listed parent firm Keppel said in a Friday night bourse filing.

Keppel FELS has assessed that the Awilco Drilling unit it signed the contract with will not be able to make its second instalment payment due in March 2021. The parties had entered the contract in March 2019. This marks the second instance of a contract between Keppel FELS and Awilco being terminated. The first contract, announced in 2018, was also worth US$425 million and involved the construction of a mid-water drilling rig. This contract was axed in June.

In the Friday filing, Keppel FELS said that it issued a notice of termination of the second contract to Awilco and commenced arbitration to enforce its rights against Awilco. It also seeks to retain the US$43 million already paid by Awilco to date, along with reimbursement of Keppel FELS' costs of the project up to termination.

As of the announcement, Keppel FELS does not expect any reversal of revenue recognised in respect of the contract, and no further impairment is expected beyond the assumptions in its latest financials for the half-year ended June.

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