Ocean Rig Provides Operational Update
Ocean Rig reports that the Leiv Eiriksson is presently working under a sublet for TotalFinaElf under the fifth of a six firm well plus six options contract with ExxonMobil. The sixth well will be drilled for BP, and the firm portion of the contract is expected to last through March next year. The rig is performing to the clients satisfaction. Ocean Rig is in a discussion regarding continuation of a drilling program under the optional portion of the contract.
Eirik Raude started drilling operations on November 1, 2002 on the first well under a contract with EnCana Corporation off the East Coast of Canada. While working under the contract, the emergency disconnect and reconnect as well as all remaining tests of the Blow Out Preventer were successfully concluded in about 1700 meter of water depth during the first half of December 2002. All acceptance testing and commissioning of Eirik Raude are now completed. The contract term is for a fixed period of six - eight months with up to five additional optional wells thereafter.
Ocean Rig has reached an agreement with its lenders in the $100 million syndicated term loan facility to a) reduce the minimum cash covenant from USD 20 million to USD 10 million and b) postpone the principal instalment of USD 6.25 million falling due in December 2002, until December 2007 as well as 70% of the principal installment equal to approximately USD 4.4 million falling due in June 2003, to be spread over the next 8 installments (2003 - 2007).
In connection with this agreement, the Board has proposed that Ocean Rig will issue USD 15 million of new equity to be subscribed in the Extraordinary General Meeting today. In addition, the Board will propose that the Company carries out a subsequent issue of up to US $5.4 million of which major shareholders will guarantee up to US $1.9 million.
Based on the above and assuming normal operations and extensions under the optional wells at day rates agreed on Eirik Raude and on market terms for Leiv Eiriksson, the Company's projections for 2003 indicate that Ocean Rig will have sufficient cash reserves to maintain adequate working capital and to comply with the Company's financial covenants.