Equator Terminates FPSO Contract

Equator Exploration Limited says that, given the ongoing delays with the Bilabri project, the contract for the FPSO BW Peace with BW Endeavour Limited ('BW'), held jointly with the operator and sole license holder of OML 122, Peak Petroleum Industries Limited ('Peak'), has been terminated due to the financial obligations of the joint venture not being met.

According to the terms of the original contract with BW, a US$20 million performance guarantee was issued on behalf of Equator Exploration (OML 122) Limited by its bankers. BW has indicated that it might activate this.

The termination follows operational issues experienced in 2007 during the drilling of the Bilabri D2 well including the forcible removal by militants of an employee of the drilling contractor from the rig.

Discussions are continuing with BW and the providers of drilling units with respect to the financial implications of the termination and the terms on which new contracts for a rig, FPSO and related supplies and equipment may be available to proceed with the development of the Bilabri field.

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