Pride International Inc. announced that the company will expand its deepwater drilling operations and its geographic reach in deepwater drilling basins to the strategically important U.S. Gulf of Mexico following the award of a five-year contract from a subsidiary of BP. The contract award is for Pride's advanced capability, ultra-deepwater drillship that is scheduled for delivery during the first quarter of 2010 and is currently in the early stages of construction at the Samsung Heavy Industries Co. Ltd. (SHI) shipyard in Geoje, South Korea. The drillship is scheduled to be the first of three ultra-deepwater units to be added to the Pride International fleet beginning in 2010 and constructed at the SHI shipyard. Following the rig's arrival, the company will have a presence in the world's three established deepwater drilling regions -- Brazil, West Africa (Angola) and the U.S. Gulf of Mexico.
The five-year contract is expected to commence during the third quarter of 2010, following the completion of shipyard construction, mobilization of the rig to the U.S. Gulf of Mexico and customer acceptance testing. Revenues that could be generated over the five-year contract term, excluding revenues for the reimbursement of costs associated with the mobilization of the rig, are approximately $876 million. The contract also provides for a cost escalation provision from the signing date of the contract through the five-year term.
The rig will be one of the most advanced ultra-deepwater drilling and completions units in the offshore industry, capable of drilling in water depths of up to 12,000 feet (equipped for 10,000 feet) and drilling to a total vertical depth of up to 40,000 feet, while offering a variable deck load of 20,000 metric tons, dynamic positioning in compliance with DPS-3 certification, expanded drilling fluids capacity, a 1,000 ton capacity top drive and living quarters for up to 200 personnel. The rig is being modified from the original design to improve on its already extensive off-line operational capabilities. Primary to these modifications is the addition of a 160-metric ton active-heave compensated construction crane that allows the rig to perform subsea construction activities, such as the placement of production trees and manifolds in up to 10,000 feet of water without obstructing the critical path of drilling deepwater wells, an additional 3,000 feet of marine riser and a corresponding increase in riser tensioning capacity. Including the modifications to the rig's technical features, commissioning and system-integrated testing, the company has revised the estimated cost to construct the rig to approximately $730 million, excluding capitalized interest, and expects to fund the construction of the unit with available cash and borrowings.
"By contracting to BP the first to be completed of our three announced ultra-deepwater drillship additions, we have partnered with one of the world's premier and most successful international ultra-deepwater exploration and production companies and a leader in the use of deepwater, dynamically positioned drilling rigs," Louis A. Raspino, president and CEO of Pride International, Inc., stated. "We will also build upon an already successful relationship involving our deepwater management business, where Pride personnel provide drilling services on three of BP's deepwater production facilities in the Gulf of Mexico. This business will continue to serve as a base for the development of deepwater drilling and operations talent and should add to our ability to provide the best technically trained personnel available for the new, ultra-modern drillship. In addition, and equally important, this contract award provides us an operating presence in the strategically significant deepwater Gulf of Mexico market sector, where new and effective technologies are expanding the offshore frontier and creating numerous long-term drilling opportunities. These opportunities add to those we see in Brazil and Angola, where the company already has well established and successful deepwater drilling operations."
In closing, Raspino added, "The modified nature of this technically advanced drillship provides an expanded suite of field development capabilities for our customers that few rigs in the mobile offshore drilling fleet can offer. Utilizing the drilling and extensive offline operations in parallel with the subsea completion capabilities, which are complemented by the active-heave compensated crane, creates drilling and completion efficiencies and tangible value that our clients desire and should advantageously position us to address additional offshore drilling opportunities for years to come."
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