SCAN Inks Sale, Lease-Back Deal with PFS Shipping for 3 Newbuilds

SCAN Geophysical has signed a Letter of Intent with PFS Shipping (Singapore) Pte Ltd (PFS) for a sale and lease-back agreement for the three newbuilds under construction at the ABG Shipyard in India.

PFS is affiliated to the ABG Group and mandated to be dominant player for the group in the offshore industry in the region. PFS is currently building a fleet of offshore supply ships and other assets with firm financing arrangements. They further intend to get into offshore operations through partnerships and joint ventures and acquisitions.

The agreement implies that SCAN will sell its three new high capacity 3D vessels, including complete seismic equipment, to PFS by assuming responsibility for the majority of the remaining commitments related to the vessels and seismic equipment during the construction period.

Upon delivery from the shipyard, the vessels will begin 12-year bareboat charters to SCAN, with following 5 x 2 years options for charterer. The charter rate per vessel, including all the seismic equipment, is agreed to be US $40,000 per day.

"We are very pleased to have PFS as the owner of our new vessels – with its Group strength and experience in building vessels at the ABG Shipyard – securing the best possible completion and delivery of the three vessels," commented Lars Johan Frigstad, President and CEO of SCAN.

"We are pleased to help SCAN weather the current market conditions and help overcome capex difficulties in their new building program. This will indeed result in an enduring partnership in the seismic market. We hope with our support SCAN will come out as a stronger company," commented Mikael Lindholm of PFS.

Based on the current good progress at the yard expected delivery date for M/V SCAN Empress is still end of March 2009 (with start up of operation mid April) as previously announced. M/V SCAN Finder and M/V SCAN Superior will be delivered in Q3 and Q4 2009 respectively, however allowing for an extension of up to 3 months if requested by PFS.

The transaction is subject to satisfactory due diligence definitive agreements and completion of the announced share issue of NOK 125-150 million. Through this agreement, PFS will also receive warrants in SCAN equal to 10% of the new share issue.