bmg litigation

This is all getting very interesting. Often, a party lodges a cross-claim just to stir the pot and attempt to “warn off” the other side. However, the points raised in the press release are interesting, nonetheless. We don’t know much about what’s going on, but here’s what I think, from published material:-
1. There were some questions about whether or not the letter of intent signed between the parties was binding or not. The fact that BMG partners have now lodged a counter-claim seems to resolve that issue: both sides believe it is (or might be considered) binding. Result: the ball is definitely in play.
2. LOI was signed under previous management (AZA) back in July 08, when oil prices were over $US140bbl. We don’t know what the project economics would be when the project was cancelled, after the oil price had plummeted to around $US40bbl, however it’s blindingly obvious that they’d be worse. Result: BMG partners have incentive to wriggle out, if a reason can be found; will now examine in excruciating detail any potential breaches they can determine, may decide to argue points they would otherwise let pass previously.
3. What we have here is a LOI. A LOI, while something more than a handshake after a drunken lunch, is something less than a signed contract. If one party intentionally, recklessly, unreasonably, etc. breaches a LOI, that is one thing. However, if there are legitimate details which the parties could not come together on, that is something else.
4. What we have here is a LOI for an operating lease. In other words, the BMG partners were never going to buy the FPSO. BW Offshore was going to build it, but retain full ownership of the vessel. In other words, this is more like cancelling the LOI to rent a factory, rather than to buy that factory. Result: the consideration is a loss of rents, not the loss of a sale. What is critical is what provisions the LOI contained surrounding the lease. Was there a minimum term? An early cancellation fee? A specific provision dealing with this kind of event?
5. In its notice of termination of the LOI in Dec 08, ROC indicated that it was 3rd party costs which BW Offshore would seek to recover, that these costs were disputed, but that there was a limit of $78.5m, in any event. Issues: are these costs due to failure to proceed from LOI to contract, or are they the total amount allowable under a final contract, which was cancelled early; what, then, are we to make of BW Offshore’s subsequent claim on 19 Feb 09 for $90.1m?
6. Today, the BMG partners have not only lodged a defence to BW Offshore’s action, but have lodged a counter-claim. That claim (in the range of $63m-$86m) relates to the costs of drilling incurred by BMG in relation to the expansion of the BMG project. Result: the BMG partners are actually blaming BW Offshore for the failure of the expansion project to proceed – this is something new.
When I look at it, it seems to me that both parties are involved in, “let’s see what we can get” actions. BW may have some claim, however their action seems to be based on claiming for the full value of all 3rd party contracts which they have entered into to date, regardless of whether the contracts they entered could be cancelled or not, and forgetting about the fact that the BMG partners were looking to enter into a lease, rather than a contract for a purchase.
On the other side, the BMG partners claiming that the costs of their expansion project (drilling and all) are worthless and all BW’s fault, seem to be too extreme.

Anyway, here is the site where you can keep track of what’s happening. The next point of interest would seem to be 8 May:-
https://www.comcourts.gov.au/file/Federal/P/VID113/2009/actions