COLUMN | Lost and found: Dolphin Drilling; Ocean Infinity and MH370; Borr Drilling; Trafigura convicted [Offshore Accounts]

“To lose one parent, may be regarded as a misfortune; to lose both looks like carelessness,” wrote Oscar Wilde in The Importance of Being Earnest.

The same is also true of oil trading companies and corruption lawsuits, as we shall see.

This week, we dig around the lost and found of the offshore industry. We discuss jobs and lawsuits lost, contracts won, and a renewed search for one of the most mysterious tragedies in aviation – Malaysia Airlines Flight 370.

But first the travails of a Norwegian driller at law in Nigeria and the UK…

Dolphin Drilling – both lost and found

On the Monday before Christmas, Dolphin Drilling dropped the good news that it had triumphed in its arbitration in Lagos against General Hydrocarbons (GHL), its recalcitrant customer in Nigeria, with which it had a bitter payment dispute over the charter of the 1974 built semi-sub Blackford Dolphin last year.

GHL hired the rig to drill on Oyo field in Blocks OML 120 and 121, a field with a checkered history, which the oil company had been awarded in a “discretionary process” without a competitive bid in 2020 – the last such award, the government has assured people.

The rig was held in Nigeria after Dolphin terminated the contract with GHL due to non-payment, and the client disputed the cancellation and tried to block the departure of the rig from the country. Dolphin prevailed in obtaining the release of the rig, so it could mobilise to India, where it started a new drilling contract with Oil India in November.

Then, in December, Dolphin announced the good news that it was in “receipt of the final award, which awards certain subsidiary entities of the group sums of approximately US$100 million. Dolphin will immediately commence collection efforts.”

Winning means collecting

Having won at arbitration, the key question is whether Dolphin will be able to collect the cash from GHL.

The news from Nigeria doesn’t look too good. At the end of last week, the local press in Lagos reported that Justice Dipeolu J had frozen some of GHL’s funds as a consortium of local banks sought to recover US$225 million from the company. If the company can collect the US$100 million award quickly, then we can expect to see a kick in the share price.

US$30 million lost in last results

The start of the Oil India contract at least provides some relief for Dolphin. The company reported a loss of US$30 million in the third quarter of last year, the most recent for which financial statements are available. Having scrapped one of the two semi-subs it bought from Transocean, Dolphin Leader, the company has only three rigs left in its fleet: Paul. B Lloyd Jr., Blackford Dolphin, and Borgland Dolphin.

With such a small fleet, the company is exposed to small fluctuations in utilisation for its rigs. Starting the Oil India contract meant that the company should have received a US$12 million mobilisation fee by the end of last year.

However, Borgland Dolphin remains offhire in Las Palmas in Spain, bleeding cash.

A loss in the UK could be painful

The Nigerian arbitration is not the only major lawsuit that the company faces. This month, the company is due in the UK Supreme Court to resolve a case over tax deductions Dolphin’s predecessor company claimed in 2014 and 2015 related to the hire of the semi-sub Borgsten Dolphin, which has now been scrapped.

Last January, the company lost a £12.8 million (now $15.9 million) case against UK tax authorities, which has been battled out at the various levels of tribunal since 2020. It’s a big claim for a small company to bear.

Won in Nigeria, lost its CEO

And on January 29, Dolphin announced the resignation of its CEO Bjørnar Iversen with immediate effect after six years in the role.

Losing a CEO with immediate effect is never a positive sign. Like Vantage, like Ventura, like Deep Value Driller and like El Dorado, which we highlighted last week, Dolphin is subscale.

A defeat in the British tax case and an unexpected technical downtime incident on just one of its working rigs would stress the company’s balance sheet. Dolphin has an operational track record and actual drillers drilling on its rig, but its fleet is aged and low specification. Its shares have fallen 75 per cent in Norwegian Krone terms since it listed in October 2022.

Now that Mr Iversen has gone after six years in the role, a merger might be the best exit for the company’s long-suffering shareholders. I suspect that both the UK case and the Nigerian collection issues need to play out before Dolphin is willing to make a deal with a suitor.

But eventually it will lose its independence.

Ocean Infinity – back looking for MH370

One of the strangest transformations of the maritime industry over the last few years has been the transformation of Ocean Infinity from a company that was ever publicity hungry seemingly in preparation for a rumoured multi-million dollar public share offering, to one that has largely disappeared under the radar amid a revolving door of senior management changes and corporate strategic u-turns, including its acquisition and then relinquising of equipment manufacturer Red Rock and security specialist Ambrey.

The company has continued to take on large government subsidies, as we have reported. If there is taxpayer largesse available, the company is usually first in line, despite seemingly being owned by a very wealthy benefactor.

Five years since it announced a massive investment in supposedly uncrewed survey vessels in its Armada fleet, the company has successfully taken delivery of eight of the vessels from Vard in Vietnam in the Armada 78 series (78m long survey vessels) and has another six preparing to enter service or under construction in its larger 86-metre long series, the first of which, Armada 86 01, was delivered in December.

But all the ships appear to remain fully crewed today, and utilisation seems to have been patchy, based on the numerous reports of the ships sitting alongside at various supply bases around the world. The company has succeeded in conducting its remotely operated vehicle (ROV) inspections from its onshore operations centres, thus meaning that it should pay full social security and income taxes on the crew. It boasted that Armada 78 02 recently “demonstrated its exceptional capabilities with a crew of just 16 onboard. Our ROV team operated remotely, successfully conducting detailed inspections of pipelines, risers, and jacket hardware using advanced imaging technology.”

How operating with a marine crew of 16 is different to most other small DOP survey vessels in the world is not clear. However, the company has certainly pioneered the use of autonomous underwater vehicles (AUVs) for marine search and is probably Kongsberg’s single biggest AUV customer in the last ten years.

Known for its successful discovery of the polar exploration vessel Endurance in the Weddell Sea, for finding both a sunken Argentinean submarine and a sunken French submarine, and for its successful location of the doomed bulker Stellar Daisy in the South Atlantic, Ocean Infinity has chalked up a remarkable track record.

But one prize has eluded it. The lost Boeing 777 jet operating as flight MH 370 for Malaysian Airlines, which deviated from its route from Kuala Lumpur to Beijing in 2014 and was lost somewhere over the Indian Ocean in March of that year with 239 people on board. Fugro was paid large sums by the Australian government to search with various towed survey arrays off Western Australia, and failed.

In 2018, Ocean Infinity sent the large subsea construction vessel Seabed Constructor to the Indian Ocean with a swarm of AUVs on board to search for the plane. The company had agreed a radical “no find, no fee” agreement with the Malaysian government, whereby it would only be paid if it located and documented the wreckage.

It also failed.

New search for lost plane

However, in December last year, the Malaysian Government announced that it had now reached an “in principle” agreement with Ocean Infinity to restart the seabed search for the wreckage of MH370 with a potential payout of US$70 million, if it can find the wreck.

Now ship-spotter Kevin Rupp has reported that Armada 7806 is just a couple of days away from reaching Port Louis in Mauritius. Armada 7808 has cleared the rough weather and is also back on schedule to reach Port Louis on February 5.

The disappearance of MH370 is aviation’s greatest unsolved mystery and is a source of great grief to the loved ones of the 239 people lost when the plane disappeared.

We wish Ocean Infinity every success with this second search.

Borr finds funds in Mexico

Following on from the news that five-rig player Paratus had taken a discount on US$209 million in invoices owed by Mexican state oil company Pemex to factor them with a financial institution so that Paratus received immediate cash, a second drilling company, Borr, has announced a similar solution. Borr’s fleet status report in November showed that it has five rigs on hire to Pemex.

Last Thursday, Borr said it was “pleased to announce that it has agreed with its major Mexican customer to receive payment settlement for approximately US$125 million related to its outstanding receivables. The company expects to collect this amount in the first half of February 2025. These payments represent over 75 per cent of the outstanding receivables with this customer as of December 31, 2024. These collections will be subject to an agreed financing fee in the mid-single digit percentage range.”

The small level of discount on the Mexican debts is great news for both companies. The companies get immediate cash up front to fund their operations (and pay dividends), and the risk of the receivables delays dragging on for months is removed. It is highly likely that Pemex’s problems are going to become structural and recurrent, but if this solution can be repeated, it removes much of the risk from the drillers, even if they have to take a haircut.  

If only all bad debts in offshore could be settled for such small discounts.

Also lost: Trafigura and its former COO against corruption charges

One of the biggest names in oil trading has gone down.

On Friday, Mike Wainwright, who served as chief operating officer of Trafigura from 2008 to 2024, was found guilty in a Swiss federal court of paying more than US$5 million in bribes between 2009 and 2011 to crooked state officials in Angola, so that the trading house could win contracts with state oil company Sonangol.

Mr Wainright was sentenced to 32 months' imprisonment, though part of the sentence was suspended. However, the multi-millionaire must serve at least a year in a Swiss prison if the appeal his lawyer says he will make, fails.

In Switzerland, a guilty person only goes to prison after their efforts at appeal have been exhausted, as highlighted by the conviction last year of the notorious PetroSaudi pair involved (allegedly) of bilking billions from the Malaysian state wealth fund, 1MDB.

Trafigura itself as a company was found guilty of not having sufficient systems in place to prevent the bribery and was ordered to pay more than US$148 million in fines and compensation. The Financial Times reported that the payments were allegedly made via third parties to an Angolan government official in exchange for fuel oil bunkering and shipping contracts in which Trafigura made more than $140 million in profits.

Amazingly, the Angolan official and a third person, a middleman in the dealings, were also convicted.

This case is a landmark. It is the first time a company has been convicted at trial in Switzerland for bribery-related charges. We suspect that it won’t the last.

In 2024, as we reported, Trafigura pleaded guilty and agreed to pay over US$126 million to resolve an investigation by the US authorities into violations of the Foreign Corrupt Practices Act (FCPA), stemming from the company's illegal scheme to pay over US$20 million in bribes to Brazilian government officials to secure oil trades with Petrobras.

The US Justice Department said that Trafigura pleaded guilty to conspiracy to violate the anti-bribery provisions of the FCPA. Pursuant to the plea agreement, Trafigura was criminally fined US$80 and suffered the forfeiture of US$46 million of illegal profits from the corruption. Like the Swiss conviction last week, this US conviction was also a criminal conviction

This year should also see a group of senior Glencore oil traders go on trial in London for corruption, after being charged of massive bribery in 2024, as we reported.

These trading companies remain intensely profitable and can well afford the fines. In the year to end September 2023, Trafigura reported a net profit of over US$7 billion. In the year to September 2024, it reported profits of “only” US$2.7 billion.

Unfortunately, where the rewards are so great, the risk of temptation to engage in unethical conduct will always exist.

Background reading

Bloomberg’s Kit Chellel wrote the definitive deep dive into Ocean Infinity in 2023 here, covering the company’s beginnings backed by a British hedge fund millionaire named Anthony Clake, setting out its successes and failures, which led in one case to one of its ships being arrested in Cyprus in early 2019 for attempting an illegal search for a 19th century wreck packed with ancient antiquities, as well as being involved in standoff with detention by the Icelandic authorities in 2017.

More information on both the past searches for MH370 and the latest attempt by Ocean Infinity are available on the excellent Radiant Physics blog run by Victor Iannello here. He anticipates that the new search might begin around February 22. We’ll keep you posted.