Ocean Rig Provides Operational Update

Ocean Rig had one rig in operation for more than 10 months and both rigs in operation for the last two months of the year. The Eirik Raude was completed and delivered under the drilling contract with EnCana Corporation on November 1, 2002. During the start-up phase, the rig also completed all outstanding system tests satisfactorily.

Eirik Raude is operated by Ocean Rig through the partnership East Coast Drilling Partners (ECDP), which is jointly owned by EnCana and Ocean Rig. ECDP as the contractor and Ocean Rig as the owner each have offices in Halifax. Ocean Rig's project organization associated with completion of the rig was dissolved during the fourth quarter.

During the fourth quarter, the rig was involved in drilling its first well on the Torbrook field offshore Nova Scotia at a water depth of approximately 1700 meters. The well was completed in mid-January 2003. Start-up of the rig was marked by extremely harsh weather with many winter storms, showing that with experienced and skilled crews Eirik Raude can operate under very difficult conditions in extreme waters. Safety on the rig has been satisfactory and no serious lost-time injuries have occurred.

After a few days for preparation and mobilization in Halifax in the second half of January, Eirik Raude started drilling its second well on February 8, 2003 on the Flemish Pass field off Newfoundland. The drilling is for PetroCanada under the contract with EnCana. The Company expects that one more well will be drilled on this field under the 6-month firm portion of the contract, which lasts until May 1, 2003. The well then being drilled however, shall be completed, indicating that the firm period of the contract will last until the beginning of June.

The Leiv Eiriksson concluded the drilling of its fourth well offshore Angola on October 20th. The well was on Block 14, at a water depth of about 1420 meters. Immediately after the completion of this well, the rig started drilling of its fifth well on Block 32 for TotalFinaElf at a water depth of about 1450 meters. The Company expects that this well will be completed in mid-March 2003. The Company will then drill its sixth well on Block 31 for BP under the firm portion of the contract with ExxonMobil.

The Company expects to complete the firm portion of the contract for Leiv Eiriksson at the beginning of June 2003. This is considerably longer than had originally been assumed, due to an additional well for Cabinda Gulf Oil Company (ChevronTexaco) in autumn last year.

After the last well for BP on block 31, the contract provides for 6 option wells for Leiv Eiriksson to ExxonMobil.

The operation of the rig during the year has progressed without significant problems. Except for the first few months, which were characterized by the start-up, the rig had only one significant interruption in operations, of about 6 days during November.

Market observers estimate that the market for deepwater rigs for water depths of more than 2000 meters will be approximately in balance during 2003.

Day rates in the deepwater segment of 1200 - 2000 meters have fallen to USD 100,000-120,000 per day during 2002, while the decline in the market rates for drilling units with a capacity of more than 2500 meters was smaller in relative terms, to a level of some USD 160,000-USD 180,000 per day.

Further growth is expected in the ultra-deepwater market, especially in West Africa where substantial discoveries were made during 2002. In addition, in 2003 three new long-term contracts on the Indian shelf were announced, which are to start at water depths of 1800-3000 meters. It is also anticipated that the deepwater activity in the Gulf of Mexico and offshore Brazil will be maintained at the current level during 2003.

In the deepwater market offshore the East Coast of Canada - where Eirik Raude, with its capacity for year-round drilling, has a competitive advantage in relation to drillships - the licenses granted indicate the potential for a substantial drilling program over the next 3-4 years.

The Company considers the potential for further deployment through the exercise of options by both ExxonMobil for Leiv Eiriksson and EnCana for Eirik Raude as good.


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