The Contract with Dragados Offshore S.A. for completion of the MPF's first Multi Purpose Floater has been terminated on amicable terms at the Company's request, and the vessel is planned to be completed at Keppel Shipyard, Singapore.
Cost increases for building, outfitting and putting the vessel into operation necessitate a re evaluation of the project.
Actions are taken by the Board in order to perform on the Petrobras contract and preserve shareholder value. Additionally, MPF has retained a financial advisor to evaluate strategic alternatives.
During the last two weeks the Board of Directors has made a thorough review of the Project costs and schedule for MPF's first Multi Purpose Floater. As a result of this review, capital expenditures to build MPF-01 are estimated to be US $210 million higher than what was assumed in the placing of the Convertible Loan in April and is now expected to be US $950 million. In addition the BoD has reviewed other costs, including interest costs, supervision, pre-operational equipment, start up costs and SG&A costs.
The increased costs are mainly caused by the change of shipyard to Keppel and related change in scope of the Cosco hull contract, drilling module modifications, engineering, further upgrade of the subsea equipment and ramp up costs. Based on a valid offer, the Company is in final negotiations with Keppel Shipyard in Singapore which will undertake the completion and commissioning of the vessel. Expected delivery time is December 2009.
The Company has received approaches from a number of interested parties and has retained Pareto Securities as financial advisor to evaluate strategic options including industrial partners. Based on an industrial solution and existing debt facilities, the funding gap to complete the project and start up of the Petrobras contract is estimated to USD 200-250 million. The Company has also mandated a leading international bank to arrange an up to USD 600 million pre- and post delivery senior financing facility.
As a result of the re-evaluation of the Project, the BoD has decided to write down the assets of the Company by $210 million in the 1st Quarter accounts approved today.
The BoD has engaged Richard Petrie (49) as CEO with immediate effect. Mr. Petrie is a UK national, with an engineering degree and MA from Cambridge and a MBA from INSEAD. Mr. Petrie has held senior management positions in contracting and engineering companies in the energy and oil & gas sector. In these positions he has managed large construction projects also related to the maritime oil & gas industry. Wilhelm P. Blystad will continue to be engaged by the Company as Senior VP Business Development. Also, Mr. Hans Petter Finne has been engaged by the BoD as Executive Chairman on an interim basis.
In a separate statement Hans Petter Finne says that, " This has been a demanding and difficult process, but I believe that the actions now taken are in the best interest of the Company and its shareholders."
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