Seadrill Takes Delivery of Fifth NewBuild Deepwater Rig

The deepwater semisubmersible rig West Hercules started operations for Husky Oil China Ltd earlier this week. The commencement on the three-year contract was in line with the estimate provided in the news release in connection with delivery of the rig from the DSME yard in Korea last month.

Furthermore, in September, Seadrill announced an agreement with Ship Finance International Limited for a combined sale and leaseback arrangement whereby Seadrill sells the ultra-deepwater semi-submersible rigs West Hercules and West Taurus for a total consideration of US $1.7 billion and simultaneously leases the units for a 15-year period.

Seadrill is pleased to inform that the sale of West Hercules to Ship Finance has been completed and that compensation of US $850 million has been received.

Seadrill has today also taken delivery of the deepwater semisubmersible rig West Taurus from the Jurong yard in Singapore. The unit was delivered one week ahead of original schedule and is expected to start transit to Brazil on November 9. The unit is contracted to Petrobras under a six-year contract. The sale and leaseback transaction for West Taurus with Ship Finance with transfer of ownership will be completed next week and Seadrill will receive some US $600 million in part compensation. The remaining US $250 million of the lease transaction will be advanced to Seadrill when the rig arrives at initial drilling location.

Seadrill has now taken delivery of five out of its eight newbuild deepwater rigs scheduled for delivery in 2008, of which three rigs have already successfully commenced operations. It is expected that the remaining three units will have been delivered within end of January 2009, and that all units will commence drilling operation shortly thereafter. Seadrill is transforming from a company with a huge investment program and limited free cash flow to a company where the majority of the deepwater newbuilds have been delivered and are generating dayrates between US $475,000 and US $630,000. This development reduces the risks significantly and creates a solid basis for a sound long term return to shareholders.

Alf C Thorkildsen, Chief Executive Officer in Seadrill Management AS, says "We are excited that West Hercules has commenced our first deepwater operation offshore China which we think will be an important offshore region in the years to come. At the same time we are pleased to have completed our second sale and leaseback transaction for a deepwater unit as sale and leaseback arrangements play an important part in the financing strategy of our Company. When it comes to the ahead of schedule delivery for West Taurus, this reflects a superb teamwork between Seadrill, the yard and its vendors."

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