Petroleum Geo-Services OK with Construction Cancellation

In an update on the company's newbuild vessels in Spain, Petroleum Geo-Services ASA, and its subsidiaries Arrow Seismic Invest II Ltd. and Arrow Seismic Invest III Ltd., has received formal notification by Factorias Vulcano that the yard intends to deliver hull number 532 under the shipbuilding contract specified for hull number 533. In the notice the yard states that this is done to be able to deliver a vessel (532) under the shipbuilding contract for hull number 533 prior to the cancellation date of July 29, 2009.

Arrow will now take this new information into consideration and have informed WesternGeco of the situation. Further information will be given to the market at a later stage.

Arrow has made all contractual payments to the yard for New builds 532 and 533, except the final installments due on delivery (EUR 36 million per vessel, which would be matched by a similar amount by WesternGeco at the time of delivery.) If a shipbuilding contract is cancelled due to late anticipated delivery by the yard, Arrow will be entitled to repayment from the yard of all installments made on the vessel, which amounts to EUR 39 million, of which EUR 32 million is secured by on-demand refund guarantees.

In a statement to Reuters concerning this news, a PGS representative said, "This is positive news for PGS, and our aim in this situation is to reduce capex."