Seadrill Decides on Bid for Remaining Eastern Shares

The board of Seadrill Limited has decided to make a mandatory bid for the outstanding shares in Eastern Drilling ASA at a price of NOK 135 per share. Accordingly, a draft offer document has been filed with the Oslo Stock Exchange for its review and approval.

The offer price is in line with what has been communicated to Seadrill by the Oslo Stock Exchange as the price required according to the decisions of the Oslo Stock Exchange's Appeals Committee on this issue. The offer period will be four weeks. The terms will otherwise comply with the requirements of the Norwegian Securities Trading Act.

The board's decision is based on a thorough evaluation of Seadrill's position in relation to the Oslo Stock Exchange, its Appeals Committee and Eastern. The board concluded that it had no other options available than to make the mandatory offer in view of the dramatic daily penalty of NOK2 million increasing to NOK4 million which now has been set by the Oslo Stock Exchange as a means of forcing Seadrill to act in accordance with the decisions of its Appeals Committee.

Seadrill will aggressively seek full compensation from the Oslo Stock Exchange for the financial and other losses incurred by it as a consequence of being forced to make this bid.

Seadrill's claim for compensation will be based on the following:

  • There was and remains no basis whatsoever for consolidating Seadrill and its counterparty in the total return swap agreements (the "TRS Agreements") Seadrill entered into during the second quarter of 2006 in respect of Eastern's shares.
    The decision to include TRS by the Oslo Stock Exchange conflicts directly with previous market practice (for example the Rieber case) and the Oslo Stock Exchange's own stated opinion in the Aban/Sinvest case at the same time. There is no legal formal or informal basis for a consolidation of Seadrill and Carnegie.
  • Seadrill should, as is the opinion of the Oslo Stock Exchange have been allowed to reduce its consolidated position in Eastern to less than 40 percent following the decision to consolidate as aforesaid and thus not be obligated to make a mandatory bid. This position is supported by the arguments put forward by the Oslo Stock Exchange itself in their decisions in the case.
  • The offer price required by the Appeals Board of NOK 135 is NOK 43 above the highest price paid by the Seadrill Group for shares in Eastern and does not take the dilutive effect of Eastern's share issue in June 2006 into consideration. Seadrill has acted in accordance with accepted market practice and applicable law in relation to the Total Return Swap Agreements. Seadrill should therefore not have been forced to make the mandatory bid which now is forthcoming. As a consequence, Seadrill believes that it is entitled to full financial compensation for the loss incurred as a consequence of the bid.

Contractual status

Four of the eight deepwater units Seadrill has under construction, including the two Eastern units, have already been awarded contracts. Specific discussions are currently in progress for the remaining units at what should be considered as favorable terms with respect to period and rates. The Board is optimistic regarding the outcome of these discussions.

Possible further investments In view of the underlying strength of the market, the progress in securing contracts for the newbuildings, and the limited availability of quality yard newbuilding slots for 2010, the Board is considering further investment opportunities in deepwater units and tender rigs.

Private placement

In order to strengthen the liquidity as well as to part finance the Eastern bid and further possible investments in deepwater or tender rig assets, the board has decided to raise US$150 million in new equity through a private placement. The offering will be lead by Carnegie ASA and Pareto Securities ASA and was expected to be closed before opening of the Oslo Stock Exchange on Tuesday.