TODCO has signed a two-year drilling contract for its drilling rig, THE 206 with PEMEX in Mexico. The two-year contract will commence in late June 2007, following completion of THE 206's current drilling contract with PEMEX in Mexico. Total revenues from the two-year contract are anticipated to be approximately $82 million. This contract contains a customary termination provision which allows PEMEX cancellation rights on five days notice, subject to certain conditions.
Additionally, the drilling rig THE 205 had completed its three-year drilling contract with PEMEX and was jacked up at a safe harbor location offshore Veracruz, Mexico while preparing to mobilize back to the U.S. Gulf of Mexico when it was struck by a cargo vessel owned by an unrelated party. The Company has not yet determined the full extent of the damage, the necessary cost and time to repair the rig or recoveries against the cargo vessel owner. The rig is insured for $33 million with a deductible for rig damage of approximately $4 million. The Company is self-insured for 30% of all losses above the deductible.
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