Petrolia Reports Preliminary Q2 Results

Petrolia Drilling ASA on Wednesday issued the following preliminary report highlighting the company's performance in the second quarter of 2006:

Summary : Stronger Petrolia meets stronger demand.

--SS Petrolia completed reactivation in the 1st quarter 2006 on time and on budget. Current contract for SS Petrolia (100% owned) started on 28th March 2006 and the rig has performed well during the 2nd quarter 2006. This contact will be followed by a new contract for the remainder of 2006, and a five-month contract starting in the spring of 2007 at a rate of USD 300.000 - USD 400.000 per day. The demand for SS Petrolia from oil companies is strong.
--Acquired 50% ownership in Venture Drilling AS, which has a bareboat agreement for the drillship DS Deep Venture. DS Deep Venture is being marketed world wide, and market rates at present is around USD 300.000 per day. The reactivation of Deep Venture in Argentina is expected to be completed in 2006.

--As per June 2006, Petrolia Drilling ASA controls approx. 42 % of the shares in PetroMena AS, a company managed by Larsen Oil & Gas Ltd, building two modern, semi submersible drilling rigs(Petrorig I and II) at the Jurong Shipyard in Singapore. The deepwater rigs are harsh environment 6th generation units designed for drilling in ultra deep waters in areas such as Brazil, the Gulf of Mexico and West Africa. Petrorig I has recently entered into a 5 years contract with Petroleo Braseliero S.A. at a value of USD 700 mill.
--Refinanced balance sheet: booked value of equity increased in the 2nd quarter 2006 to MNOK 1088, including share issue 21st April of 165 000 000 new shares at a subscription price of NOK 3.65 per share.
--Booked equity also includes incorporation of 42% ownership in Petromena AS. Due to fall in share price, this investment is written down with MNOK 29,8 in the second quarter, corresponding to a total value of MNOK 765.
--SS Petrolia has a book value of MNOK 150, which reflects historic cost, including upgrades, adjusted for depreciation. The market value of the rig in today's market is believed to be significantly higher.

Financial information

The financial data have been prepared in accordance with the International Financial Reporting Standards (IFRS).

SS Petrolia commenced contract on the 28th of March 2006 at a rate of USD 150.000 per day, and has performed well during the 2nd quarter.

Operating result for the 2nd quarter 2006 was MNOK 24.8. The operational cost MNOK 50.7, includes mobilization costs of MNOK 3. The net result for the 2nd quarter, was MNOK 19.4 including net negative financial result of MNOK (30.5), and tax loss carry forward of MNOK 32.

Operating result for the period from 1/1 -30/06 of 2006 was MNOK 10.0. The expenses consist mainly of reactivation/mobilization of SS Petrolia in the 1st quarter, and operation of SS Petrolia in the 2nd quarter.

The net result per 30/6.06 was positive with MNOK 1.2, including net negative financial items of MNOK (28.1) and tax loss carry forward of MNOK 32.

As per 30 June 2006 total assets amounted to MNOK 1 896. SS Petrolia has a book value MNOK 150, which reflects historic cost, including upgrades, adjusted for depreciation. The market value of the rig in today's market is assumingly significantly higher.

Petrolia Drilling ASA has in the 2nd quarter of 2006 issued 165 000 000 new shares at a subscription price of NOK 3.65 per share in a private placement on the 21st April 2006. Gross proceeds from the private placement amounted to MNOK 602.

After the 21 April 2006 private placement, the share capital of Petrolia Drilling ASA amounts to NOK 386 195 999, divided into 772 391 998 shares, each with a par value of NOK 0.50.

The Market

The semi market has continued to develop positively during the 2nd quarter of 2006, with improving day rates and rig utilization. The utilization for semis in UK is close to 90%, while the overall utilization is in excess of 95%.

Recent fixtures in the 2nd generation semi market on the UK shelf in the North Sea corresponds to day rates of approximately USD 300.000 - 350.000.

The utilization in the deepwater segment, hereunder drillships, is close to 100%. Recent fixtures in the drill ship market corresponds to day rates of approximately USD 300.000-400.000.

Based on this market Petrolia Drilling ASA invested in Petromena AS, which has entered into agreements for construction of two modern, semi submersible drilling rigs at the Jurong-yard in Singapore. The deepwater water rigs are 6th generation units for drilling in ultra deep waters as the Mexico-gulf, Brazil and West Africa. The company's board is expecting a favorable rig market in the next few years.

The market for offshore services will continue to be strong.

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