China: Prospector Orders Two Jack-up Rigs from SWS

Prospector Offshore Drilling S.A. announced today that it has entered into a turnkey contract for the construction of two additional high specification harsh environment F&G JU-2000E jack-up drilling rigs at the Shanghai Waigaoqiao Shipbuilding Co. Ltd (SWS) Shipyard in Shanghai China. After these two new rig construction contracts, the Company will have six new jack-ups under construction.

SWS is a part of the China State Shipbuilding Company and is an experienced shipbuilder and offshore yard having previously constructed ships, FPSOs and semisubmersible drilling rigs. SWS has recently finished the construction of a purpose built facility to be used for new jack-up construction.

Total delivered cost is estimated to be USD 209 million per rig, including shipyard price, project management, commissioning costs, drilling and handling tools, and spare parts. The payment terms are USD 2 million per rig of the shipyard price at contract effectiveness and the balance at rig delivery. The shipyard price includes a USD 7 million provision for owner specified drilling and handling tools, and spare parts. There is a contract provision to allow the Company (at its sole discretion) to delay delivery, and final payment, of each rig for up to six months under certain conditions.The Company anticipates that the jack-up rig deliveries from the shipyard will occur in the first quarter of 2014 and the second quarter 2014. Contract terms are otherwise consistent with industry standards. The contracts are contingent on receipt of customary refund guarantees from SWS and the Company making payments of the first installments by 10 August 2010.

The Company also announced today that it has secured a package of t hree new rig construction options (“Rig Options”) with SWS, bringing the total number of options the Company has to six. The Rig Options are priced at the same turnkey shipyard price as the first two rigs, subject to standard escalations, with a down payment of 10% of the contract price and the remaining 90% on delivery, with a delivery of 31 months from the date of exercising the options. The Rig Options are valid until 30 June 2012, 30 September and 31 December 2012, respectively. There is no provision for owner elected delivery delay on the option rigs.

Norsupply AS, a company wholly owned by Skeie Technology AS, has acted as an advisor to SWS in the process leading up to this transaction. Skeie Technology AS is a shareholder of the Company.

Robert W. Rose, President and Chief Executive Officer of the Company says “SWS is one of the largest and most resourceful shipyards in the world, with a great history of project development and delivery. We are pleased at this opportunity to cooperate with SWS and acquire these rigs under such favorable payment terms. These contracts are separate from our existing new builds and allow that program of construction, financing and chartering to continue uninterrupted and on plan. These rigs will have identical drilling and operating systems to our first four rigs, including the most advanced and automated drilling equipment, enabling them to effectively perform the most difficult and challenging field developments worldwide (excluding Norway and the Artic) ” .

About the Company:

The Company is a high specification jack-up drilling contractor. The Company currently has contracts in place for the design, construction, and delivery of six F&G JU2000E high specification, harsh environment (HS/HE) jack-up drilling rigs with deliveries commencing in the fourth quarter 2012. The Company has option agreements for six additional rigs of the same design. Upon deployment the Company will have the newest fleet of HS/HE jack-up rigs in the world, operating with the most advanced drilling systems, under a proven management team.

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Source: Prospector Offshore Drilling, August 03, 2011; Image: SWS