Parker Drilling announced that completion of its two new-design Arctic Alaska Drilling Units (AADUs) has been delayed to allow the Company to modify the rigs to meet their design and functional requirements. The need for the modifications was determined as a result of comprehensive safety, technical and operational reviews during recent commissioning activities of these prototype drilling rigs. The modification work will extend the commissioning activities and increase the rigs' total costs.
As a result of the extended construction and commissioning schedule and related increased costs, the two rigs' cost at completion is currently estimated to be $385 million, which includes capitalized interest of approximately $49 million. This cost exceeds the estimated fair value of the rigs based on their projected cash flows. In order to adjust the rigs' values to their estimated fair value, the Company expects to record a pre-tax, non-cash charge in the 2011 fourth quarter of approximately $171 million. This is expected to reduce 2011 fourth quarter after-tax earnings per share by approximately $0.95.
The AADUs represent a new class of drilling rig that incorporates some of the most advanced features available in the global land rig market, including a safety-engineered, state-of-the-art equipment package; a highly automated drilling system; zero-discharge capabilities; and a modular design allowing the entire rig to transport itself in three, fully-enclosed mobile units.
"Our intent is to deliver to our customer and to Alaska's North Slope drilling market a more productive drilling rig than what is currently available. We expect the AADUs to establish a new standard of performance for arctic drilling programs," said Parker Drilling President and Chief Executive Officer, David Mannon.
"The unique design for these new, technologically-advanced rigs posed engineering, construction and commissioning challenges that have resulted in unanticipated design modifications, delays and cost increases. The actions we are taking are important to meeting the operational and safety objectives we desire. We continue to work diligently toward completion of this project," said Mannon.
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