Smedvig Finalizes Settlement of Balder FPU Dispute

Smedvig has entered into the following agreements related to the disputes concerning the construction and sale of the production unit Balder FPU:

Firstly, Esso Norge AS and Smedvig have agreed to waive all outstanding claims concerning the Balder FPU litigation process. As such, all remaining issues between Esso and Smedvig have been settled without any further payments.

Secondly, Smedvig has reached a final settlement with Keppel FELS in relation to the building contract for Balder FPU (save and except for claims relating to warranty works). Under this agreement Smedvig will receive US$ 25 million in cash and have a right to seek indemnity from the underwriters of the warranty insurance in respect of claims relating to warranty works.

Furthermore, Keppel FELS has granted Smedvig an option to bareboat charter (with an option to purchase) one plus one self-erecting semi-submersible tender rig hull. The first option expires April 15, 2004. The arrangements and terms are substantially similar to the West Alliance tender rig, which Keppel Shipyard built and sold to Smedvig in November 2001.