PGS Notes New Build Contract Termination in Spain

Reference is made to earlier announcements regarding the vessels under construction at the Factorias Vulcano shipyard in Spain. Petroleum Geo-Services (PGS) announced, on August 25, 2009, that its subsidiary Arrow Seismic Invest III Ltd. ('Arrow') had terminated the shipbuilding contract for New Build number 533. Arrow has today received a formal notice of "commencement of arbitration" from the yard, disputing Arrow's right to terminate the shipbuilding contract for New Build number 533.

The shipbuilding contract is governed by Norwegian law. The parties will, according to the contract, meet for arbitration in Norway. Arrow strongly believes that its termination is rightful, and will pursue its claim for refund of the installed amounts.

Following the notice of "commencement of arbitration", Arrow cannot expect to receive payments under the refund guarantees until the arbitration is resolved.