Smedvig Inks Deal for New Semisub

Smedvig has entered into agreements with Eastern Drilling ASA to participate with a 10 percent ownership share in the company as well as construction supervision, marketing and operations management of a new 6th generation semi-submersible drilling unit.

The semi-submersible drilling rig will be constructed by Samsung Heavy Industries in South Korea. Total investment is estimated to US$ 550 million. The investment estimate includes all costs, delivered from the yard, exclusive operations preparations and mobilization. Smedvig's 10 percent ownership share in Eastern Drilling is estimated to approximately US$ 30 million.

The construction supervision agreement will cover the construction period of the unit while the management and operations agreement, which has a ten-year duration, will cover the operating period, following the delivery of the rig. Both agreements are based on competitive market terms, and the management agreement includes an incentive arrangement.

The new rig will be the most advanced drilling unit ever built. The rig is designed with a dual derrick, dynamic positioning, a 6,000-ton variable deck load capacity and with a water depth capability up to 3,000 meters. The deepwater unit will be constructed for winter operations in northern areas. The unit has been designed with special environmental focus, minimizing the exposure to the environment. As a result, the rig will have a closed drainage system, dedicated slop tank for waste oil handling and tanks for treated cuttings.

The drilling rig will be ready for delivery from the yard in the fourth quarter 2007, and commencement of operations is scheduled for the first quarter of 2008. Marketing of the unit will start immediately and will cover all deepwater areas around the world.

The contract between Eastern Drilling and Samsung includes an option for an identical rig on similar terms and conditions, which has to be declared within 12 months from signing of the contract. The contract between Eastern Drilling and Smedvig also includes the optional rig. The contracts are made subject to completion of the scheduled Eastern Drilling equity offering.

Kjell E Jacobsen, Chief Executive Officer in Smedvig asa says: "This contract is in line with Smedvig's strategy of investing in advanced deep water drilling units that also can operate in harsh environments. Smedvig's participation in this project demonstrates our long-term confidence in the drilling markets".

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