PetroProd Progresses on FPSO Conversions, Jackups to Meet Demand

Further to its Notice from July 8, 2008, PetroProd has given the following business updates related to its two main areas of operations:

FPSO/FSO conversions and contract status

The MOU with an undisclosed client expired on the July 17 without definitive contract signed due to inadequacy of client offered payment guarantee. PetroProd decided not to extend the MOU, but will continue dialogue on a non-exclusive basis with the potential client until further notice.

PetroProd is also in dialogue with another client for the 'Arch' who would require approximately same start up of operation (May-July, 2009) and basically to the full utilization of the company's generic design basis and equipment selection.

The MT 'Arch' is continuing the conversion work with expected completion from shipyard somewhat later than initial plans. This delay is caused by PetroProd`s decision not to install more of the equipment on board than needed for the selected field application. The main component deliveries are continuing according to plan and
the co-operation with the shipyard is working well.

The other two tankers have continued trading as tankers, with the MT 'Archimid' coming off its last charter next week due to Special Survey class renewal requirements. This class renewal will not be undertaken until the vessel has obtained a contract. PetroProd is in discussion with a potential client for a minor conversion into an FSO for a long term contract in the Asia region.

The MT 'Trust' is planned to continue trading until end of 2008.

All vessels are actively marketed.

PetroProd is pleased to see an upturn in the demand for fast track FPSO/FSO in the market which is considered to be a confirmation that the company`s strategy was correct. PetroProd are still of the opinion that the number of players in the FPSO/FSO market is too high and that a market consolidation will take place in the near future, actively supported by PetroProd.

Drilling & Production Jack-ups (MSC/Gusto CJ70)

The work on the 1st CJ70 is progressing on schedule and the Company foresees no delay to the Delivery Date at this point in time. PetroProd is also in the process of firming up a 2nd identical unit for delivery Q2, 2011.

The demand for these jackups is very high and the company is confident contracts will be obtained within the next 6-8 months. A major tender will be delivered early August.

For the operation of the jackups, PetroProd considers a co-operation with other drilling contractors in Norway/North Sea.