Diamond Offshore has sued Australian oil and gas producer Beach Energy Ltd for abruptly terminating a $US65 million ($A101 million) drilling contract, the offshore rig contractor that filed for Chapter 11 bankruptcy protection says.

Diamond Offshore, which filed for bankruptcy protection on Sunday, said Beach terminated the agreement, claiming Diamond Offshore missed a “contractual milestone to deliver the rig”.

The US-based contract driller said the delay was “largely of Beach’s own making” and an attempt to renegotiate the deal for more favourable terms. Diamond asked the court to declare the termination notice invalid.

Beach was not immediately available for a comment outside office hours.

Prices and demand for oilfield services has worsened since the launch of a “price war” between OPEC and Russia and a steep cut in oil demand caused by the coronavirus pandemic.

Under the drilling agreement, the rig would have been used to drill six wells over a year and Diamond Offshore stood to earn a minimum of about $US65 million or more if Beach exercised some of its options.

Diamond Offshore said it had spent more than $US100 million to prepare and transport the deepwater rig to execute the drilling program in the Otway Basin off the southern coast of Australia to fulfil the contract.

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