PetroProd Enters into $216MM Purchasing Agreement for FPSO 'Arc'

PetroProd has entered into an agreement with an undisclosed operator (the "Buyer") to sell the MT Arc vessel, which is currently in the process of being converted to a FPSO at the Jurong Shipyard in Singapore. The purchase price is US $216 million, less commission and sales expenses.

The Buyer will make milestone payments, commencing in February/March 2009, during the remainder of the conversion period, with a final instalment payment to be made after the Vessel will have commenced operations at the designated work area specified by the Buyer, expected to be in Q1, 2010. The deal will be structured as a combination of sale and subscription of shares in a wholly-owned subsidiary of the Company (the "Subsidiary") to be established, which Subsidiary will take over title to the Vessel and all rights and obligations to the conversion project pre-closing. The Subsidiary will be responsible for the completion of the conversion project at the yard. The sale will represent an exit from the FPSO market for the Company for the time being, and the Company will focus future business on the sophisticated jack-up market.

The Contract is subject to approval by relevant bondholders, and the Company will call a bondholders meeting shortly to approve the sale and certain amendments to be proposed to the FPSO bond loan agreement
(ISIN NO 001 0347735).