Canada's High Arctic Energy Services Inc. (High Arctic or the Company) reported Wednesday that it has signed a new Drilling Services Agreement with InterOil Corporation for one heli-portable drilling rig in Papua New Guinea (PNG). High Arctic has agreed to provide one drilling rig and a 100 person camp for a firm contract term of two years with an extension option available to InterOil for one additional year. The two year term commences once the rig has been mobilized and is ready to commence drilling operations. The contract is projected to deliver annualized revenue of approximately $30 million during the drilling operations. The target spud date for the first well is November 2014.
In conjunction with the award of this contract, High Arctic has agreed to purchase two heli-portable drilling rigs and associated ancillary equipment. The total commitment to purchase and deliver the two rigs with upgrades is estimated at $52 million. The matching rigs are AC self-erecting 1500 HP triple drilling rigs designed and manufactured as heli-portable. The rigs can be broken down into 5,952 pound (2,700 kilogram) loads allowing maximum transportation versatility and flexible alternatives in helicopter selection. Constructed in 2010, the rigs feature the latest safety designs and drilling automation technology, and have each had approximately one year of use.
Kevin Doran, High Arctic’s president, International, stated; “The acquisition of these two drilling rigs is a significant milestone for High Arctic and reflects our continued commitment to expanding our presence within Papua New Guinea. We are excited to be working with InterOil as they move towards commercializing their resources. The second rig should position us to take advantage of the growing activity in the country.”
The rig purchase is subject to customary closing conditions and closing is expected to occur by mid-May. The rigs are currently being prepared to be shipped to PNG with an expected landing date in June. The first rig will then be commissioned and upgraded at a customer supplied yard near Port Moresby. The first rig is expected to be mobilized to the field in November at which time revenue streams will commence. The second rig will then be commissioned and is expected to be available for use in early 2015. The Company will market the second rig to both existing and potential new customers in PNG.
The Company plans to acquire the rigs using existing cash on hand and available capacity on its current revolving loan facility.
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