Petrobras Taps Scorpion to Build Deepwater Semisubmersible

Scorpion Offshore Ltd. has received a letter of commitment from Petrobras for a newbuild deepwater semisubmersible for operations offshore Brazil prior to June 2012. The contract has a duration of 6 years with potential revenue of approximately US $ 1.1 billion plus operating cost inflation adjustments throughout the contract term. The cashflow from this contract will result in full payout of the rig during the initial contract term.

This entry by Scorpion into the deepwater segment of the offshore drilling business is the result of the continued execution of the Company's original strategy. Scorpion's semisubmersible contract is its second contract with Petrobras with the Offshore Defender having began operations in Brazil in March. The addition of this deepwater semisubmersible to Scorpion's fleet will supplement its ultra premium jackup strategy. The new rig will be a dynamically-positioned, four column semisubmersible capable of drilling wells to 8,500 meters in water depths up to 2,400 meters. Scorpion is currently in discussions with several shipyards to finalize rig specifications, delivery slot and final pricing and anticipates updating the market with this information shortly.

The LOC is subject to certain conditions including the requirement to submit a letter of guarantee for a shipyard slot within 30 days hereof and agreement of final contractual terms and conditions. The contract is anticipated to be signed in the near future.

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