Northern Offshore, Transocean Ink Agreements for GSF Actic II, IV Rigs

Northern Offshore, Ltd. has entered into agreements with affiliates of Transocean, Inc. to acquire the semisubmersible drilling rigs GSF Arctic II and GSF Arctic IV currently operating in the U.K. North Sea. The total acquisition price for the two rigs is approximately US$750 million.

The purchase of the GSF Arctic IV is expected to close in the third quarter of 2008 and the purchase of the GSF Arctic II is expected to close in the fourth quarter of 2008, following completion of existing contract commitments.

CEO, Marion M. Woolie, said, "We are very pleased to announce the planned acquisition of these strategic assets. This transaction will greatly improve the Company’s earnings visibility and will be accretive to shareholders. The acquisition is an important next step in the Company’s growth strategy and builds on the North Sea jackup acquisitions in 2007. The Rigs are well-maintained, high quality assets that will complement our existing fleet. They provide significant additional scale to our North Sea operations and facilitate a more cost efficient organization. The senior management of Northern Offshore, having been formerly employed by GlobalSantaFe, is well acquainted with the Rigs and their crews, which should ensure a safe and smooth integration process."

Under the purchase and sale agreements, the Rigs will be owned by subsidiaries of Northern Offshore. Transocean will provide $745 million in seller financing through December 31, 2010, at an interest rate of 10% per annum. The financing will be secured by the Rigs, but non-recourse to Northern Offshore and its other affiliates. Closing is subject to customary consent of the Company’s lenders.

The Rigs are both third generation Friede & Goldman Enhanced Pacesetter design and can operate in water depths of 1,200 feet (GSF Arctic II) and 1,500 feet (GSF Arctic IV). The Rigs can drill to depths of 25,000 feet. The GSF Arctic II is contracted through late 2008 at dayrates in excess of US$400,000 per day. The GSF Arctic IV is contracted with Shell until September 2010.

The Company will enter into a bareboat charter agreement with Transocean for the GSF Arctic IV for the duration of the Shell contract at a rate of US$180,000 per day. The entire charter rate will be applied to the interest and principal due on the seller financing. Transocean will remain responsible for all daily operating expenses of the GSF Arctic IV during the term of the charter. The seller financing will also require principal and interest payments of $200,000 per day on the GSF Arctic II, commencing one month after closing of the purchase of GSF Arctic II. The Company anticipates refinancing the balance of the seller financing on or prior to December 31, 2010.

Transocean agreed to divest the Rigs in furtherance of its previously announced undertakings to the U.K. Office of Fair Trading (OFT) in connection with its November 2007 merger with GlobalSantaFe Corporation. The OFT has approved Northern Offshore as a qualified purchaser of the Rigs. As part of the approval process, Northern Offshore advised the OFT of its firm intention to operate the Rigs in the U.K. North Sea for at least three years from closing.


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