Songa Offshore Sees 1Q06 Loss

Songa Offshore's consolidated after tax loss for the 1st quarter 2006 was US $8.9 million. Operating expenses of US $6.3 million for the period are related to the refurbishment work for the Songa Venus, the Songa Mercur and the Songa Saturn as well as general overhead expenses.

Financial expenses for the period were US $8.6 million of which US $3.9 million is a non-cash item related to the change of value in an option issued in connection with a lease agreement for a blow out preventer entered into in October 2005.

The income for the period is related to mobilization fee from customers and management fee from the joint venture Songa Management.

Main events in the 1st quarter:

Songa Offshore entered into a memorandum of agreement for the purchase of the semisubmersible drilling rig Stena Dee, to be renamed Songa Dee.

The company issued a US $75 million secured bond loan as part financing for the Stena Dee rig acquisition.

A private placement issuing 6,300,000 new shares at a subscription price of NOK 58 per share was done as part financing of the Stena Dee rig acquisition.

A drilling contract was entered into with Noble Energy for the drill ship Songa Saturn.

A Letter of Intent for a drilling contract was entered into for Deepsea Bergen. Songa Offshore ASA owns 20.187% of Deepsea Bergen.

Tom E. Jebsen accepted employment as Chief Financial Officer (CFO) in the Group.

Songa Venus
Songa Venus is currently in Singapore for client specific upgrade at Keppel FELS yard. Contract with ENI/Inpex in Australia at US $205,000/day for 1 year plus 2 x 6 months option at US $225,000/day plus approximately US $15 million for mob/demob and upgrading cost. Commencement is estimated September 2006.

Songa Mercur
The rig is being actively marketed, and several opportunities with potential operators are being pursued. Due to interest from potential clients, a detailed engineering study for upgrading the Mercur to 5,000 ft water depth is currently being carried out. A shortage of deepwater rigs in the coming years is anticipated, and Mercur may become one of the first new available deepwater rigs.

Songa Saturn
Songa Saturn is currently at a shipyard in Turkey for reactivating, class renewal and upgrading. Contract with Noble Energy at approximately US $338,750/day for 3 wells firm plus option for 2 additional wells in Equatorial Guinea. The upgrading project is on schedule, and the Saturn is expected to leave the yard during third quarter 2006. The company is currently in discussions with potential clients about further work in the same region.

DeepSea Bergen
The DeepSea Bergen is working for Marathon Oil at approx US $144,000/day. Recently it was announced a letter of intent for a 3 year contract with Statoil at approx US $320,000/day - with start in direct continuation from current contract - estimated between 3Q/4Q 2008. Songa Offshore's ownership share in the DeepSea Bergen rig is classified as a financial investment. Rig values have increased, and based on valuations from rig brokers for DeepSea Bergen has an estimated value of US $250 - 280 million on a 100% basis. Songa Offshore have therefore increased the equity value of the investment.

Stena Dee
The rig is to be renamed Songa Dee Delivery of the Songa Dee is estimated to take place within 2 weeks. Simultaneously the rig will be bareboated back to sellers at US $42,000/day until end of the Norsk Hydro charter - estimated end 2008.

There are many long term development requirements for rigs of this kind in the North Sea - for start 1Q/2Q 2009 - and the company will actively pursue these opportunities.

Financing and share capital issues In connection with the acquisition of the rig Stena Dee, Songa Offshore issued 6.3 million shares in a private placement. The subscription price of NOK 58 per share raised net gross proceeds of NOK 365.4 million.

During the first quarter a total of 5,431,189 shares were issued following conversion of freely tradable warrants. Conversion price is US $1.50. As of March 31, 2006 a total of 13,838,044 freely tradable warrants were remaining in the market. The warrant program expires in May 2008.

As of March 31, 2006 Songa Offshore's interest bearing debt was US $179.6 million, of which US $108.1 million was a bond loan and US $71.5 million was bank loan facilities. Unused bank loan facilities totaled US $42.8 million. In addition, Songa Offshore had lease obligations totaling US $18.8 million in connection with a lease agreement for a blow out preventer. Bank deposits and cash at March 31, 2006 was US $26.6 million. Market conditions and outlook

The demand for drilling vessels continues to be strong in all segments. Due to limited near-term availability of drilling rigs, the market expects increases in day rates in the short to medium term.

Songa Offshore is well positioned to exploit the good market conditions. The company has established a competent management team and necessary infrastructure in order to operate its vessels under contract.


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