Songa Presents a Rosy 5-Year Outlook
Songa Offshore ASA has released the following report highlighting major developments for the second quarter 2006.
Songa Venus is currently under contract preparation in Singapore after having been operationally upgraded in Galveston, Texas. The estimated time of departure (ETD) from Singapore is late September. Additional requirements from the Australian National Offshore Petroleum Authority, NOPSA to meet mandatory safety case requirements, combined with additional equipment and contract required upgrades has increased expected total capital expenditure to approximately US$43 million.
Songa Mercur is currently under tow to Singapore, and is expected to arrive in September. Based on the efforts and experiences with Songa Venus, the rig has already started the approval process with NOPSA, as well as planning and preparation of required upgrades and equipment installations for full safety case and contractual compliance. The estimated total capital expenditure for this rig is approximately US$25 million. ETD from Singapore is estimated to be November.
Songa Saturn is currently undergoing upgrading at Tuzla, Turkey. This project is the most complicated project. Based on higher specifications including increasing water depth capacity from 2,500 to 3,300 feet, the projected capital expenditure is estimated to be approximately US$100 million. The vessel's ETD is November.
The recruiting of key personnel for all three rigs has progressed according to plan and all rigs are close to fully staffed to commence the jobs they are scheduled for.
In connection with the acquisition of the rigs, upgrading requirements in the range of US$100 million were communicated. The current financiers of the rigs have indicated that they will participate in financing upgrading requirements. As explained above this is now set at approximately US$170 million, of which most of the increase is explained by higher specifications and operating costs which runs during time of delay.
Based on the contracts at hand and the projected operating costs on the company's drilling rig fleet, the estimated EBITDA contribution is approximately US$230 million annually, effective from late fourth quarter this year. Based on initial discussions with existing and new clients for follow-on contracts, Songa pointed out that the day rates being discussed are higher than the contracted rates. With Saturn available for new contracts 3Q 2007, Mercur from 4Q 2007, Venus from 4Q 2008 and Songa Dee from beginning 2009, the company's board expects the company to generate substantial cash flows and earnings during the next 5 years.
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