PetroMENA to Buy Rig for $225 Million

PetroMENA, Petrolia Drilling ASA and Petrolia Rigs AS, a fully owned subsidiary of Petrolia Drilling, have agreed to a transaction whereby a new wholly owned subsidiary of PetroMENA, PetroRig IV AS, will acquire the semisubmersible drilling rig SS Petrolia. PetroRig IV will be established in Cyprus or other jurisdiction.

PetroRig IV will pay a consideration of U.S. $225 million for SS Petrolia, with settlement in cash. The Acquisition is expected to be financed by a three-year, U.S. $300 million senior bond to be issued by PetroMENA.

The Acquisition is subject to approval by the general meetings of both PetroMENA and Petrolia Drilling, issue of the US $300 million Bond and signing of a final sale & purchase agreement by the Parties.

The SS Petrolia is an upgraded second generation semisubmersible drilling rig, Pentagone design, built in 1976. The rig was upgraded in 2005/2006 and is suitable for operations in water depths up to 1,200 feet.

The Rig is classified by Det Norske Veritas and is registered in Liberia. SS Petrolia has been drilling offshore Ireland UK North Sea, but is now in transit to the Mexican sector of the Gulf of Mexico.

SS Petrolia is expected to arrive in the Gulf of Mexico in December 2007, to embark on a 2.5 year (913 days) contract with Pemex with an estimated gross value of U.S. $269 million.

Larsen Oil & Gas Ltd has been manager for SS Petrolia through a management agreement with Petrolia Rigs. Larsen is also engaged as manager for PetroRig I and II, and PetroRig IV will continue the management agreement with Larsen with respect to SS Petrolia.

The Bond will be secured with first priority in SS Petrolia, the earnings and the related accounts and also with security in shares related to PetroMENA's three existing deepwater rigs under construction with the Jurong Shipyard in Singapore and in PetroRig IV. All units have secured long-term contracts.

The Bond will have a term of three years and carry a coupon of 10.85% p.a. Pareto Securities ASA and Fearnley Fonds ASA have been engaged as managers for the Bond.

Marketing and sale of the Bond will begin during week 43 and settlement date is expected to be November 19, 2007.

The extraordinary general meeting in PetroMENA is expected to take place by mid-November 2007. Final closing of the Acquisition is expected by mid-December 2007. Title and ownership to the Rig will be transferred to PetroRig IV against cash settlement of the agreed consideration (US $ 225 million).

An information memorandum is under preparation and will be submitted to Oslo Axess for approval by the end of October 2007. Subject to normal approval procedures by Oslo Axess, PetroMENA expects public distribution of the information memorandum shortly before the planned extraordinary general meeting in mid-November 2007.

PetroMENA currently has three modern deepwater semisubmersible rigs under construction at the Jurong shipyard in Singapore. These three sixth generation rigs will be deployed in the GoM and / or Brazil for Petrobras (PetroRig I and II) and Pemex (PetroRig III) during 2009 and 2010.

By acquiring SS Petrolia, PetroMENA will get immediate cash flow from the Pemex contract starting from December 2007, and will build a presence in an important region for PetroMENA before deployment of PetroMENA's new rigs. The Board of PetroMENA believes that some experiences from the SS Petrolia contract in the GoM, particularly relating to logistics, customer reporting, and on-shore activities, may be transferred to the new PetroMENA rigs, to the benefit of its customers, Petrobras and Pemex. PetroMENA is also hopeful that a larger and more diverse rig fleet will make PetroMENA an even more attractive partner for oil companies in the South America region and elsewhere, resulting in new contract opportunities.

Until delivery of PetroRig I in January 2009, PetroMENA expects no material revenues and negative cash flow from operations from the three rigs under construction in Singapore. SS Petrolia will be on contract with Pemex until mid-2010, and is expected to generate significant revenues and positive operating cash flow.

The Bond shall be repaid in three years, with in excess of 2/3 of the principal amount maturing in November 2010; PetroMENA may therefore expect positive cash flow from SS Petrolia in 2008 and 2009, barring unforeseen events or developments.

As of June 30, 2007, PetroMENA Group had an equity ratio of approximately 37.2 percent. The Acquisition will be 100 percent financed by debt. As a result, the pro forma estimated equity ratio for the PetroMENA Group as per June 30, 2007 will decline to approximately 29.1 percent (based on a USD / NOK exchange rate of 5.4).

SS Petrolia has been owned by Petrolia Rigs AS, a wholly owned subsidiary of Petrolia Drilling. Some of the drilling equipment onboard SS Petrolia, which will be acquired by PetroRig IV, has been owned by other companies in the Petrolia Drilling Group. As no separate audited financial statements have been prepared for SS Petrolia, the following key financial figures for SS Petrolia have been extracted from the historical financial statements for the Petrolia Drilling Group. The key financial figures below are un-audited and are presented for illustration purposes only.

Upon sale of SS Petrolia to PetroMENA, the Rig will be debt free (before the Bond issue), but PetroMENA will assume other contractual rights and obligations related to the Pemex contract, management contracts, insurance and other ordinary business contracts for rigs in operation.

PetroMENA was incorporated on January 7, 2005. The following key financial figures for 2005 and 2006 are extracted from PetroMENA's audited annual reports, while the figures for the interim periods have been extracted from PetroMENA's preliminary, un-audited quarterly reports.

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