Referring to announcements made on August 19th and 21st, FPSOcean has carried out a thorough review of the remaining scope of work and contracts terms with major counterparts in order to qualify a final cost estimate and schedule to complete the conversion of "DeeP Producer 1," to form the basis for a solid continued operations of FPSOcean and a successful financing solution.
The Company has proposed and the Board of Directors has approved a new overall schedule with mechanical completion expected by end of January 2009 and "sail away" from the yard expected by late May 2009 and an overall cost to "sail away" (including commissioning and sea trials) amounting to US $335 million.
The new overall cost budget will require approximately US $85 million of new funding to complete "DeeP Producer 1." In addition the Board of Directors proposes to raise sufficient funds to fully finance the company (including working capital for the "DeeP Producer 2" project currently in standby mode) until the end of the 2nd quarter 2009 as revenue is expected to be generated from the 3rd quarter 2009.
Total new financing proposed is US $100 million. Management and the Board are working with its lenders to explore the possibility of increasing the 1st priority construction loan and with its core shareholders to raise additional equity or subordinated capital. Pareto has been mandated to assist the Company in raising additional equity or subordinated capital and is also leading the company's dialogue with strategic investors.
The "DeeP Producer 1" conversion is close to 90% complete and all major equipment is already at site (except the disconnectable buoy expected to arrive in December). Remaining scope of work is essentially related to completion of electrical and instrumentation work, completion of living quarters, some piping installations and commissioning/sea trials.
The above schedule and cost are the result of a detailed review of all remaining work packages and deliveries by a 14 member task force including internal and external experienced personnel as well as individual negotiations with key suppliers and the yard, Drydocks World-Dubai.
The yard contract is being renegotiated to include a lump sum and a defined schedule with a bonus and penalty mechanism designed to meet the estimated mechanical complete date. FPSOcean has provided offers to DWD for additional skilled workers to improve capacity and progress at the yard. Key supplier contracts are being renegotiated to include a higher level of commitment to deliver remaining scope within an agreed number of hours and within an agreed timeframe.
Following the appointment of Einar Saunes as new acting CEO several adjustments have been made to the organization, including hiring additional people for critical project engineering, construction and commissioning activities as well as project management and cost control. In addition, reporting lines and work processes have been adjusted to increase focus on conversion progress and cost control.
Equipment packages for "DeeP Producer 2," including the vessel "Semakau," Siemens turbines and Schottel thrusters have been successfully financed until mid 2009. The company is preparing for an estimated US $3 million FEED project with an oil major for this vessel and has obtained an early release of some of the funds. If successful, this FEED is expected to be followed by a contract award during the 1st quarter 2009.
Management is conducting dialogues with several oil majors for possible future contract award for "DeeP Producer 1." Specifically, management is pursuing three opportunities for a "DeeP Producer 1" contract award with planned start up during the 3rd or 4th quarter 2009 and one opportunity for "DeeP Producer 2" with oil majors or national oil companies in addition to the FEED follow-on prospect mentioned above.
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