KS Energy Enters Contract to Charter a Jackup

Earlier this year, KS Energy Services was contracted to provide an upgraded offshore jack-up unit to an Asian-based state owned oil & gas group. The Company reports that the project is ahead of schedule. With the consent of the customer, the rights to the offshore jack-up unit will be transferred at cost to New Strong Group Limited, a joint venture company equally owned by KS Energy and Ezra Holdings Limited (refer to the announcement dated 22 November 2005). In turn, the JV will transfer the rights to the jack-up unit to KSES (USA) Inc ("KSES USA"), a 25% associate of the Company, for a consideration of US$44.5 million.

By working with a US-based oil & gas company, KSES USA will charter the offshore jack-up (non-drilling) unit to support the offshore drilling operations of an international oil company in the Gulf of Mexico. The Contract is for a period of 6 months with an option to extend a further 6 months. The total value of the one-year Contract is approximately US$14.6 million.

The Contract is another example of KS Energy's diversified capabilities to provide a wide range of offshore capital equipment to the global oil & gas industry. The Company's penetration into the US oil & gas industry marks a further geographical expansion of its activities and reaffirms the Group's position as a global solution provider of energy related services.

The Contract is not expected to have a material impact on the Group's earnings per share or net tangible assets for the financial year ending 31 December 2005. None of the directors or substantial shareholders of the Company has any interest, directly or indirectly, in the above transaction.