Spanish yard disputes cancellation

Following the earlier announcements that Arrow Seismic Invest II Ltd, a subsidiary of Petroleum Geo-Services ASA (PGS), had terminated the shipbuilding contract with the Spanish shipbuilder Factorias Vulcano, the Norwegian offshore company has received a formal notice of “commencement of arbitration” from the yard which disputes PGS’s right to terminate the shipbuilding contract for hull 532.

The shipbuilding contract is governed by Norwegian law and the parties will, according to the contract, meet for arbitration in Norway. Arrow strongly believes that its termination is rightful, and will pursue its claim for refund of the installed amounts. The yard previously announced that the hull for vessel 532 would be delivered to a different company at a later stage, and hence would not be able to deliver according to the contract cancellation date of 31 March 2009.

Following the notice of “commencement of arbitration”, Arrow cannot expect to receive payments under the refund guarantees until the arbitration is resolved and the cancellation of vessel 532 is expected to result in an impairment charge of up to $50 million recorded in the first quarter results.