In conjunction with these transactions, Bronco and Challenger will enter into agreements under which Challenger will engage Bronco to provide broad-based operational and managerial assistance and support to Challenger. The transactions are expected to close during the fourth quarter of 2007, subject to various customary closing conditions and the completion of a satisfactory due diligence review by Bronco.
The drilling rigs to be contributed by Bronco consist of five rigs from Bronco’s existing marketed fleet and one rig newly constructed by Bronco.
Frank Harrison, Chief Executive Officer, stated, "We have been diligently working on expanding the company internationally and are very pleased to have reached this agreement with Challenger. This transaction allows us to deploy a portion of our fleet abroad that is not ideally suited for the unconventional drilling which dominates activity in the United States and also provides the company greater exposure to oil. The MENA area has become a region of tremendous growth and opportunity and we are excited about participating in its potential. We are confident that the combination of Bronco and Challenger will create a formidable contractor in the Libyan market and beyond."
In conjunction with these transactions, Bronco moved the rigs to be contributed and sold to our various yards to begin preparation for mobilization to Libya. The interruption of revenue on these rigs will have an impact on earnings in the fourth quarter, which Bronco has estimated to be approximately $.05 per share on a fully diluted basis.
Bronco estimates that the investment in Challenger will generate approximately $.20 to $.22 per share on a fully diluted basis in 2008. Bronco anticipates that it will account for the investment in Challenger using the equity method of accounting, and that the company’s balance sheet and statement of operations will contain captions showing the investment in Challenger based on fair market value of the contributed assets and the income or loss generated by the 25% ownership in Challenger.
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