Deep Sea Enters Sales and Leaseback Transaction for two OSVs

Deep Sea Supply has entered heads of agreement for another sale and leaseback transaction with Ship Finance International Limited for two of its offshore supply vessels.

Gross sales proceeds from sale of the two vessels are US$126 million. The transaction strengthens Deep Sea Supply's cash position with around US$63 million after repayment of the existing debt on the vessels. The Board suggests distributing the majority of these proceeds to the shareholders subject to the necessary approvals.

Deep Sea Supply has currently a fleet of 15 offshore supply vessels in operation and a newbuilding program of another 16 vessels at shipyards in Norway, Singapore and India with expected deliveries in 2007 - 2009.

The sale and leaseback transaction involves the two Anchor Handling Tug and Supply Vessels 'Sea Leopard' (AHTS KMAR 404 BHP 15,000) and 'Sea Bear' (AHTS KMAR 404 BHP 15,000) which were built at Kvaerner Kleven in Norway in 1998 and 1999. The sales price for the AHTS vessels will be US$63 million each.

Gross sales proceeds are hence US$126 million. A seller's credit of US$22 million has been agreed and the sales proceeds net of such seller's credit will hence be US$104 million. Net proceeds to Deep Sea Supply, after repayment of the existing debt related to the vessels, are US$63 million

The bareboat charters with Ship Finance International Limited are for a period of 12 years with several purchase options during the charter period. The bareboat rates will be as follows;

Years  2 x AHTS      Sum per day
1-2      $20,750       $41,500
3-5      $18,750       $37,500
6-7      $16,750       $33,500
8-12     $13,750       $27,500
(The final rates may vary dependent on actual LIBOR interest rates on closing.)

The charter contracts are on bareboat basis and Deep Sea Supply will therefore be responsible for all operating and maintenance costs during the charter period. The vessels are currently on time charters at significantly higher rates.

The purchase options for each of the vessels are as follows:

Year     2 x AHTS  
3        $42.00 mill
5        $34,80 mill
7        $27,90 mill
10       $18,70 mill
12       $10,85 mill

Once final detailed agreement for the transaction has been executed, more detailed information will be made public.

This is the second transaction the Company has entered into with Ship Finance International Limited in 2007. The first transaction, involving 2 AHTS and 3 platform supply vessels (PSVs), was successfully concluded in October. As part of the new agreement, it has been agreed that one of the vessels in the first transaction may potentially be re-purchased by Deep Sea Supply prior to the first agreed purchase option date.

Following this sales and leaseback transaction, Deep Sea Supply has a financing of its assets consisting of senior loan facility from shipping banks, bond financing and the above mentioned sales and leaseback transaction. The Company considers the sale and leaseback transaction as a useful financing tool providing additional financial flexibility to the Group.

Deep Sea Supply is actively examining ways to enhance return to equity to shareholders. Both transactions with Ship Finance International Limited entered into this year highlight the financial flexibility that exists in the fleet of 31 vessels and contracts, to either facilitate growth or increase dividend capacity.

Please be informed that Hemen Holding Ltd. owns approximately 35% of Deep Sea Supply Plc and - together with an associated company - 41% of Ship Finance International Limited.