Redhall takes legal advice over £9m contract cancellation

The Wakefield-based group said it had been informed by Sea Dragon Offshore Limited that it no longer intended to continue with the contracted fit-out of the Sea Dragon semi-submersible oil rig scheduled for the second half of the financial year ended September 2009. The work is being undertaken by Chieftain, a wholly owned subsidiary of Redhall under a contract signed in April last year. Redhall said it was taking legal advice about possible compensation on the basis that the contract is not fulfilled. The fit-out was due to begin this month at the company's facilities in the North East and Redhall has manufactured pipe work required to commence the fit-out. The total contract value is approximately £9 million and was expected to contribute about £1 million of profit . Redhall said initial discussions with Sea Dragon had indicated that it was prepared to make certain reparations should the contract not be replaced. Formal negotiations about compensation from Sea Dragon were “expected to take place as soon as possible”. Redhall has also started discussions with other potential parties of similar tender types regarding replacing the revenue expected under the Sea Dragon contract. Redhall’s management said they were confident that various actions could be taken to mitigate the effects of this contract termination. Redhall said it had experienced a strong start to trading in the first quarter for the year ending 30 September 2009, with profit ahead of budget.