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Songa Offshore Secures $2.66B Statoil Rig Gig

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Songa Offshore SE announced that its 100 percent owned subsidiary, Songa Rig AS, has received and accepted a Letter of Award (LOA) from Statoil for two newbuild "cat D" semisubmersible rigs. This award follows the agreement of July 2011 between Songa Rig AS and Statoil for the first two cat D rigs. The contract period is for eight years with an aggregated value of $2.66 billion, with options for extensions of another 12 years (4x3 years) per rig.

"We are proud to extend our industrial cooperation with Statoil, and look forward to assuming our position as a leading drilling contractor on the Norwegian Continental Shelf. The cat D rigs are the building blocks in Songa Offshore's long-term strategy of advancing its position in the harsh waters of the North Sea and the Barents Sea. Songa Offshore will operate three semisubmersible rigs for Statoil from second half of 2012 and with the delivery of these four new cat D rigs in 2014/15, Songa Offshore will take a lead role in the region with a total of seven rigs carrying out exploration and production drilling for Statoil and its partners," said Asbjørn Vavik, CEO of Songa Offshore SE.

Vidar Skjelbred, Songa Offshore's country manager for Norway, said, "The first unit is due for delivery from Korea February 2014 and the last unit will be delivered in May 2015. We are pleased that these four new rigs, in combination with the three already in operation, provide further development opportunities for our current employees. The fleet stability provided by Statoil's long-term commitment to these rigs and the overall fleet size also provides exciting possibilities for further recruitment and training of the workforce. In addition, the common design of the four rigs also allows for interchange of parts, equipment, crew and other resources, leading to an overall savings in average operating costs."

Daewoo Shipbuilding & Marine Engineering Co (DSME) in South Korea will build the rigs at a fixed price of $570 million per unit, inclusive of optional Statoil upgrades that include Barents Sea winterization and other enhancements. The drilling package will be delivered by Aker Solutions.

The 20/80 payment terms are staggered by the delivery schedule. Statoil has granted Songa Offshore a bridge financing for the 20 percent down payment to DSME that is based on standard market terms and conditions. Further construction costs will be funded from a combination of ongoing cash flows in addition to traditional bank loan financing.

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