SeaDragon Secures First Contract for Oban B

SeaDragon Offshore has secured it's first contract with PEMEX for the SeaDragon Offshore I (SDO I "Oban B"), the first of three semisubmersible rigs to be built by SeaDragon with topside to be constructed in Teesside, in the biggest offshore drilling vessel construction project in the UK for a generation. Following the successful outcome of the PEMEX tender and resulting contract of SDO I 'Oban B', SeaDragon intends to raise additional finance to construct SDO I 'Oban B' through an equity placement.

SeaDragon has signed a contract with PEMEX Exploration and Production for a total value of up to US $958 million over a 5 year term for SDO I 'Oban B', a deepwater, harsh environment semisubmersible drilling vessel capable of drilling in up to 10,000ft of water. SDO I is expected to be on site in field 'NEN-1' situated in the Gulf of Mexico by January 2010 to start drilling in 5,000 feet of water.

Construction of the SDO I has already commenced. Construction of the first hull will be completed in Sevmash yard, Russia, in 2008. SeaDragon has recently agreed to take the option for the second hull (SDO II), which is due to be completed at the Vyborg yard, Russia to arrive in Teesside by first quarter 2009.

SeaDragon will complete the topside of the vessels in Teesside at the Haverton Hill yard used by the Tees Alliance Group (TAG). TAG is currently in the last stages of mobilisation of the management and work force, with module construction of SDO I due to begin by October 2007. The Project will combine the project management skills of the SeaDragon management team, RDS designers and engineers of offshore drilling rigs and part of KCA DEUTAG international drilling contractor (part of The Abbot Group plc), and Moss Maritime (leading naval architects), and will utilize the TAG's construction capacity. The project is backed by asset financing arranged by Lloyds TSB Bank plc. TAG will utilize the expertise of local workforce and local industry partners Cleveland Bridge and McGill who will be subcontractors to TAG in the SeaDragon project.

The Company is actively seeking to secure a charter for the second semisubmersible vessel, SDO II, commencing 2011. With the building of SDO I and SDO II, SeaDragon anticipates potential employment for over 600 engineers and contractors at the Haverton Hill yard, the biggest drilling rig construction project to be undertaken in the UK for more than a generation.

SeaDragon has appointed ABN Amro to advise the Company on its options for the equity financing of the development of SDO I and SDO II. The Company and its advisors are reviewing all financing options to maximize value for all stakeholders.

Steve Baird, Chairman of SeaDragon Offshore, commented:

"Securing the charter with one of the world's leading national oil companies. For the first of SeaDragon's proposed three semisubmersible rigs is an outstanding achievement. The charter fully underpins SeaDragon's strategy of becoming a leading semisubmersible rig construction company harnessing the considerable skills of the UK offshore oil services sector. This is a good start for SeaDragon and its existing shareholders and, with two more charters to obtain it is an excellent opportunity for us to share in the growth of SeaDragon by embarking on one of the more significant oil rig equity placements of the year."

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