Eastern Drilling Reports 2nd Quarter Results

Eastern Drilling

The company entered on June 20, 2006 into a contract for the construction of the second semisubmersible drilling rig - preliminary labeled as Rig 2 - on a turn key basis. The contract price is MUSD 478. Delivery of the rig is contracted to be in 3rd quarter 2008, after a construction period of 26 months.

Construction of West E-drill is continuing to develop according to plan for delivery in 4th quarter 2007, and the major construction work at the yard now is assembly of blocks for the columns and pontoons.

A letter of intent for three years assignment of West E-drill lapsed in May. A non-refundable amount of US $10 million was received under the letter of intent. Marketing of the rig has continued, and keen interest among oil companies is being observed.

An issue of 13,333,333 new shares in a private placement which provided approx. US $193 million in new equity, was approved by the EGM on June 15, 2006.

The two rigs will be state of the art harsh environment and ultra deep water rigs based on well known design and technology. Estimated total project cost for the two units is US $1,158 million included owners expenses and expected additional equipment, divided between West E-drill with US $580 million and Rig 2 with US $578 million.

Management contracts for the two rigs for the construction period and for minimum 10 years thereafter with Seadrill Offshore AS (formerly Smedvig Offshore AS) are securing Eastern Drilling long term first class competence and capacity for commercial and technical operations.

Eastern Drilling had a net profit of US $10,916,000 in second quarter of 2006 compared to a net loss of US $280,000 in second quarter 2005. Except for the income of US $10 million reported this quarter, Operating revenues are not expected until last quarter 2007.