A Russian affiliate of Exxon Mobil Corp. and a contractor will settle a dispute over allegedly botched designs for an offshore drilling platform for $78 million after a New York federal judge forced the parties into arbitration last year.
WorleyParsons Ltd. said Thursday that it will pay Exxon Neftegas Ltd. $55 million in cash and drop a $23 million dollar counterclaim for work under a contract to provide the oil and gas giant’s unit with engineering, procurement and technical support services for the Arkutun-Dagi offshore platform.
The settlement puts to bed a suit brought by the Exxon unit after becoming dissatisfied with WorleyParsons' contractual performance on the above-water portion, or “topsides,” of an oil drilling platform destined for the the oil and gas field off of the coast of Sakhalin Island in far eastern Russia.
“The settlement has led to normalization of the parties’ business relationship,” WorleyParsons said in a news release.
The suit, which was filed by Exxon Neftegas in December 2014, alleged that WorleyParsons’ defective work led to a yearlong delay in the project despite having paid WorleyParsons more than $550 million for designs. The project delivery and energy consultant filed counterclaims for $23 million for work it allegedly did for Exxon but had not previously invoiced.
In a June 2014 bench ruling, New York Supreme Court Judge Charles Ramos said a provision which gives New York courts jurisdiction for dispute resolution contained in an agreement between the companies didn’t supersede a separate agreement concerning engineering services.
Judge Ramos said there was a sort of catch-all clause in exhibits to the engineering services agreement, of which the guarantee is one, that stated if there were any inconsistency between the engineering services agreement and the exhibits, then the services agreement would take precedence.
This forced the suit into arbitration between the two companies, which has apparently resulted in the settlement announced today.
As part of the $78 million deal, WorleyParsons will pay a total of $55 million in cash to the company. Initially, $20 million will be paid in the 2015 fiscal year, then the remaining $35 million will be paid semi-annually over the next three to four years, according to the news release.
Exxon is represented by Joseph Serino Jr. and Andrew A. Kassof of Kirkland & Ellis LLP.
WorleyParsons is represented by Chris Paparella, John Fellas and Hagit Elul of Hughes Hubbard & Reed LLP.
The case is Exxon Neftegas Ltd. v. WorleyParsons Ltd., case number 654405/2013 in the Supreme Court of the State of New York, County of New York.
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