Diamond Offshore Drilling, Inc. (ticker: DO) and Petróleo Brasileiro S.A.-Petrobras (ticker: PBR) agreed on Thursday, January 4, 2018 to settle a pending lawsuit and amend the Ocean Valor drilling contract.

In August 2016, a subsidiary of Diamond Offshore Drilling, Inc. received notice of termination from Petrobras of its drilling contract on the Ocean Valor.

The drilling contract was originally estimated to conclude in October 2018. In August 2016, the subsidiary of Diamond Offshore filed a lawsuit against Petrobras in the 17th Lower Court of Rio de Janeiro Central District. In September 2016, the presiding judge in the case issued a preliminary injunction, suspending Petrobras’ termination of the contract and ordering that the contract remain in effect until the end of the contract term or further court order. As a result of the injunction, which was upheld on appeal in March 2017, the contract has remained in effect and has not been terminated.

On Thursday, January 4, 2018, Diamond and Petrobras agreed to settle the lawsuit and amend the Ocean Valor drilling contract. The agreement is intended to resolve all pending and prospective claims by purchasers of Petrobras securities in the United States.

Diamond filed an 8-K on January 4, 2018 and included information regarding the amendment to the original contract. The 8-K details that Diamond will allow for the rig to be in an extended standby period retroactively from July 2017 to the end of September 2018 at a rate equal to approximately US$190,000 per day and then for the rig to continue under contract with Petrobras for an extended period through the end of September 2020 at a rate equal to approximately US$289,000 per day.

Diamond’s financial results for the quarterly period ending December 31, 2017 will include a one-time charge of approximately US$20 million for the estimated retroactive adjustment to reflect the discounted standby day rate earned by the Ocean Valor during the previously-reported quarterly period ended September 30, 2017, Diamond Offshore said in its 8-K filing with the SEC.

Under the proposed settlement, Petrobras has agreed to pay US$ 2.95 billion to resolve claims in two installments of US$983 million and a last installment of US$984 million.


The agreement will be submitted to the district court in New York for review. If preliminary approval is granted, the court will notify the members of the class of the terms of the proposed settlement. After considering any objections and a hearing on the fairness of the proposed settlement, the court will decide whether to grant final approval.

As a result of the agreement, the parties will ask the United States Supreme Court to defer consideration of Petrobras’s petition for a writ of certiorari, which was scheduled for January 5, 2018, pending final approval of the proposed settlement, Petrobras said in a statement.

Legal Notice