Pride International has been awarded a five-year contract from a subsidiary of BP for Pride's advanced-capability, ultra-deepwater drillship that is scheduled for delivery in mid-2010. The unit is being constructed at the Samsung Heavy Industries, Co. Ltd. (SHI) shipyard in Geoje, South Korea on a fixed-price basis and is expected to be initially utilized in the U.S. Gulf of Mexico, with further operations possible on BP's other global deepwater interests. The drillship is one of three Pride ultra-deepwater units under construction at the SHI shipyard. All three units have now been awarded contracts with durations of at least five years.
The five-year contract is expected to commence during the fourth quarter of 2010, following the completion of shipyard construction, mobilization of the rig to an initial operating location 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 $984 million. The contract also provides for a cost escalation provision effective from April 30, 2008 through the five-year contract 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. The rig will offer 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 will be modified from the original design to improve on its already extensive off-line operational capabilities. Design modifications include 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, and an additional 2,000 feet of marine riser. The unit will not initially be functional as a dual-activity rig, but can be modified to add this functionality in the future. Pride has previously purchased the license for the use of dual-activity from the patent holder. Including the modifications requested by our customer to the rig's technical features, commissioning and system-integrated testing, the company has revised the estimated cost to construct the rig to approximately $725 million, excluding capitalized interest, and expects to fund the construction of the unit with available cash and borrowings.
Louis A. Raspino, President and Chief Executive Officer of Pride International, Inc., stated, "With this five-year contract award, Pride has further expanded its service to BP to now include two advanced-capability, ultra-deepwater drillships currently under construction and expected to begin operations in the U.S. Gulf of Mexico during 2010, the management of drilling activities on three deepwater production facilities in the U.S. Gulf of Mexico and deepwater drilling operations in the Eastern Mediterranean. This contract award allows us to further build a greater presence in the ultra-deepwater U.S. Gulf of Mexico, a strategically important and technically challenging region."
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