Hess may be seeking up to $40 million from Schlumberger NV for an alleged faulty valve that impacted production at one of the company’s offshore fields.
According to Reuters, Hess announced in its second quarter conference call that it will pursue legal action to seek remediation fees for an alleged defective safety valve at Tubular Bells.
The company could be seeking as much as $40 million from Schlumberger, Reuters said.
During the company’s second quarter call, Hess president and COO Gregory P. Hill said the company is “going to go after the cost of the replacement belts, the cost of the remediation work, lost profits due to downtime and all the attorney’s fees.”
Hess has not yet filed a lawsuit and has not disclosed further details about its plans.
“Obviously it’s extremely disappointing,” Hill added according to a transcript provided by Seeking Alpha.
Hill said during the call that Tubular Bells was impacted by three subsurface safety valve failures.
According to Reuters, two of the four wells at Tubular Bells were closed for regular maintenance in the second quarter that was expected to last about a month.
However, the valve issue forced Hess to close a third well at the field earlier this month, Reuters added.
The second valve failure impacted the company in the second quarter and the third failure will impact the company in the third quarter, Hill said.
Hill said during the call that the failures impacted about 15,000 barrels a day of Tubular Bell’s production guidance.
Capacity at Tubular Bells was not impacted by the valve issues, Hill added.
The well closures prompted Hess to cut its production forecast for Tubular Bells down to about 10,000 barrels of oil equivalent per day from its previous forecast of about 25,000 barrels of oil equivalent per day, Reuters said.
Hill said during the earnings call that Hess expects production in the Gulf of Mexico to be back up to about 70,000 to 75,000 barrels per day near the end of this year.
Schlumberger has not commented on the matter.
During the call, Hill added that safety valves being supplied by Schlumberger for the Stampede field have been upgraded and quality control problems appear to have been fixed.
Hess operates Tubular Bells with a 57.14 percent working interest.
Chevron holds the remaining 42.86 percent working interest in the field.