Northern Offshore Announces Restructuring Proposal

Northern Offshore Ltd. did not make the US$7.2 million interest payment due on May 15, 2004 in connection with its 10% senior notes due 2005, which constitutes an event of default under the indenture governing the senior notes. However, the Company announced that it has commenced discussions with an unofficial committee of noteholders regarding a potential restructuring of the Company.

As previously announced on June 1, 2004, the Company has proposed a transaction whereby the Company's senior notes together with its Norwegian krone-denominated floating rate notes due 2004 would be exchanged for newly issued shares of common stock representing 85% of the Company's fully diluted share capital, with the remaining 15% to be retained by current shareholders. The transaction would be consummated under Bermuda law through a scheme of arrangement and an increase in share capital approved by Northern Offshore's shareholders. Additionally, the Company anticipates repaying the Company's secured debt using a portion of its existing cash balance such that the Company would be debt free following the transaction.

The Company believes it is in the best interests of all stakeholders to implement a restructuring as quickly as possible. To that end, the Company is working with a committee of noteholders to work toward implementing a consensual transaction. To facilitate this process, the Company hired Houlihan Lokey Howard & Zukin (Europe) Ltd as its financial advisor to assist in implementing the plan.

It is the Company's opinion that the implementation of such a plan is critical to the continued operation of the Company. Absent a consensual agreement, the Company believes it may be forced to appoint a Bermuda-based liquidator who will be responsible for the liquidation of the Company's assets for the benefit of its creditors. It is, in the Company's opinion, most likely that the Company's current equity would have no value and its unsecured debt would be substantially impaired in such a liquidation process.