Union Drilling Exercises Option to Build Three New Rigs

Union Drilling said that it will exercise its option with National Oilwell Varco to acquire three new 1,500-horsepower SCR IDEAL(TM) rigs for $25.2 million.

Union paid $1 million for the option, which will be applied against the purchase price. With the addition of drill pipe, handling tools, and other items not supplied by National Oilwell Varco, the company estimates the total price per rig will be approximately $10 million.

The new rigs will be deployed in the northern Texas Barnett Shale formation under multi-year contracts and are scheduled to be delivered during the fourth quarter of 2006. The exercise of this option follows the company's previously announced purchase of three similar rigs last December. These rigs are scheduled for delivery in the second and third quarters of 2006 and also will be deployed into the Barnett Shale.

"We are pleased to be providing our customers with six state-of-the-art drilling rigs for their applications in the Barnett Shale," said Chris Strong, Union Drilling's president and CEO. "When compared to 1,500-horsepower rig designs from the last period of significant rig construction in the late 1970s and early 1980s, these rigs can be moved in about half the number of trailer loads and can work on smaller locations.

Strong added that the rigs have advanced solids control systems for long-radius horizontal drilling and come equipped with features such as joystick controls and hospital-grade muffler systems on the rigs' engines. "The acquisition of these rigs is a continuation of our strategy to focus on unconventional natural gas drilling," he said.