PetroProd Hopes to Improve Results After FPSO, Jackup Deliveries

PetroProd reported that the MOU signed with an undisclosed client on April 29, 2008, for 5-year charter of M/T Arch after conversion, expired on July 17, 2008 without a definitive contract signed due to inadequacy of client offered payment guarantee. PetroProd decided not to extend the MOU, but will continue dialogue on a non-exclusive basis with the potential client until further notice.

PetroProd is also in dialogue with another client for M/T Arch who would require approximately same start up of operation (May-July, 2009) and basically to the full utilization of the Company's generic design basis and equipment selection.

M/T Arch is continuing the conversion work with expected completion from shipyard somewhat later than initial plans. This delay is caused by PetroProd's decision not to install more of the equipment on board than needed for the selected field application. The main component deliveries are continuing according to plan and the
co-operation with the shipyard is working well.

Vessels Operations

The other two tankers (M/T Archimid and M/T Trust) have continued trading as tankers, with the M/T Archimid having completed its last charter by end July 2008 due to Special Survey class renewal requirements. This class renewal will not be undertaken until the vessel has obtained a contract. PetroProd is in discussion with a
potential client for a minor conversion of M/T Archimid into an FSO for a contract in the Asia region.

The M/T Trust is planned to continue trading until early 2009.

Drilling & Production Jackups (MSC/Gusto CJ70)

The work on the 1st CJ70 is progressing on schedule. At this point in time, the Company foresees no delay to the delivery date.

PetroProd is also in the process of firming up a 2nd identical unit for delivery in the second quarter of 2011.

For the operation of the jackups, PetroProd considers a co-operation with other drilling contractors in Norway/North Sea.

Financial Information

The net result for the 2nd quarter 2008 was USD -13.1 million, compared to USD -7.6 million in the 2nd quarter of 2007. Net financial expense for 2nd quarter 2008 amounted to USD 4.8 million and USD 2.1 million for 2nd quarter 2007.

The Company is expected to improve its results after taking delivery of the FPSOs and the CJ70.


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