PGS Reaches Agreement on Petrojarl Varg Contract

PGS has reached an agreement in principle with the PL 038 license owners on the main terms of a new compensation structure for the FPSO Petrojarl Varg producing the Varg field on the Norwegian Continental shelf.

The main terms of the revised agreement consist of a fixed base day rate of $ 90,000 and a variable rate of $ 6.30 per barrel. PGS is entitled to terminate the agreement if the production of the Varg field falls below 15,700 barrels a day. The new tariff structure is effective from May 29, 2004. The agreement is subject to completion of mutually acceptable documentation.

As disclosed on June 8, 2004, PGS Production AS and the license owners have, as a result of the extension of the Varg field's life, been in discussions relative to modifying the contract structure for the Petrojarl Varg FPSO. Effective May 29, 2004, the license owners have been compensating PGS a fixed day rate of $220,000.

As previously reported the production on the Varg field is expected to exceed 25,000 barrels of oil per day in second half of 2004. The new compensation structure will give PGS increased revenues from producing the Varg field compared to the $ 220,000 fixed day rate.

The Varg field is located in Production License 038 (Block 15/12) in the Norwegian sector of the North Sea. Pertra AS is the operator of Production License 038 with 70% interest while co-venturer Petoro AS holds the remaining 30%.