Buccaneer counter-sues Archer over Inlet jack-up rig

Naomi KloudaHomer Tribune

HOMER -- Buccaneer has filed a lawsuit in Texas District Court against Archer Drilling that asks for $30 million in damages or lost income due to the actions of its contractor.

Current delays in achieving certifications are also to be blamed on Archer, says the suit, because they continue to withhold crucial documents proving what work was done on the jack-up rig Endeavour. The suit was filed March 11.

Archer Drilling was hired by Kenai Offshore in October 2011 under a Master Services Agreement to provide project management for the modifications and repairs on the Endeavour jack-up rig. While the $68 million jack-up was in a Singapore shipyard, Archer was charged with overseeing repairs and retrofitting it for work in Arctic conditions. The rig arrived in Homer Aug. 26 with a supposedly "short list" of work to complete. The list grew to 10 pages, Buccaneer says in its lawsuit, some of it work Archer claimed to have completed at the shipyard.

In December, Archer walked off the job and filed a lawsuit asking for $6 million in unpaid bills. By then, the jack-up rig had remained at the Homer Deep Water Dock for four months.

The counterclaim in the District Court, Harris County Texas against Archer Drilling claims fraud, and lost contracts due to the damages sustained by Buccaneer and its subsidiary Kenai Drilling, LLC. Delays at the Homer dock resulted in millions of dollars of damage, including the $30 million in lost revenue Buccaneer calculates due to the inability to undertake drilling operations in Cook Inlet.

Kenai Offshore is in the process of preparing its own counterclaim against Archer Drilling for damages, Buccaneer director Dean Gallegos said in a prepared statement.

Under the management contract, Archer was charged with project management, project engineering, risk assessment, change management, procurement control, project planning/reporting and had the responsibility for documentation as required by regulatory agencies.

When Archer terminated the contract, all the employees and managers walked off the job and they took documents with them, the lawsuit alleges. "Archer abandoned the rig, removed rig documents and certificates necessary for the vessel to be approved for operations in Alaska," the lawsuit states. "Archer also ordered its project management personnel off the Endeavour, intentionally depriving KOV and Kenai Drilling of the institutional knowledge needed for an orderly and expeditious transition and completion of work."

Even today, Archer continues to withhold documents "and will not surrender them until all disputed amounts are paid," the lawsuit says. Archer was paid $3.4 million at the beginning of the contract and has now been paid all but $1.4 million of disputed debt, the suit says. KOV and KD were forced to spend millions of dollars correcting unsatisfactory work, thereby paying twice over.

At some point, Archer grew vindictive and even slowed down work more, according to Buccaneer's lawsuit. "Archer had seen the projections for the profitability of the Endeavour and its projects and pressured KD to allow it to manage drilling operations with a guaranteed profit element and further profit sharing as a component of compensation," the suit states. Buccaneer discussed the arrangement with Archer in good faith, but upon learning the status of the work needed to get the rig certified and unhappy with Archer's work, KD refused additional negotiations. Then, "Archer's progress on the Endeavour, while incremental at best, slowed further."

The lawsuit complains Buccaneer has reneged on contracts because of Archer's delays, such as on signed for a sales contract to supply gas to Enstar and, when available, to ConocoPhillips' LNG plant.

There's also the role the jack-up rig was to play hired out for other drilling work by signed agreement on Oct. 29, 2012. The delays caused by Archer "continue to damage KD because KD has various agreements with third parties to drill wells using the Endeavour," the lawsuit says. "Some of those agreements require KD to drill, because if drilling is not commenced, the underlying leases may be lost."

Homer Tribune