Since this process started, Ocean Rig has significantly improved its position by adding several years of new contracts at record day rate levels. The resulting strong future free cash flow could be used for repayment of capital, capacity expansion or a combination of the two.
Ocean Rig has been in discussions regarding potential acquisition transactions. The company has not yet seen sufficient value creating potential through these transactions, mainly because relative valuation did not reflect the improved position of Ocean Rig.
The company believes, for the time being, that a program for return of capital to shareholders is important in order to maximize shareholder value. The board will therefore propose to the next shareholding meeting a repayment program for capital.
Buy back of shares will be one of the elements in the program, and the company already has an authority to buy back shares representing 10% of the share capital. The company will buy up to 10% of the outstanding number of shares within year end 2006. Repurchases are expected to be made on a discretionary basis in the open market or otherwise at times and amounts as determined by management, subject to market conditions, applicable legal requirements, available cash and other factors.
The Executive Chairman, Geir Aune, said, " I am very pleased by the fact that the combination of the company's improved position and the current strong business environment for our services allow us to structure a repayment program for capital and at the same time maintain financial capacity to grow the company".
Based on recent market development the company believes it can secure additional contracts at attractive day rates. This increased backlog would leave room for more leverage through increased debt, resulting in a potential higher return of capital to shareholders while maintaining an adequate risk profile.
The company will continue to pursue potential transactions, both related to combinations with other companies and increase of capacity through acquisition of drilling assets, in order to capitalize on and leverage the company's good market position and proven operational expertise.
Ocean Rig owns and operates two of the world's largest and most modern drilling rigs, built for ultra deep waters and extreme weather conditions. The units are currently operating offshore Congo and Norway.
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