HOUSTON, May 6, 2008 (PRIME NEWSWIRE) -- Transocean Inc. (NYSE:RIG) today announced that one of its subsidiaries has been awarded a five-year drilling contract for another enhanced Enterprise-class design newbuild drillship. In the past three years, Transocean has announced nine newbuild ultra-deepwater drilling rigs, including five enhanced Enterprise-class drillships.
The five-year drilling contract is expected to commence during the fourth quarter of 2010, following shipyard construction, sea trials, mobilization and customer acceptance. The contract commencement date is contingent on vendor performance and other factors. The term of the drilling contract may be extended to seven or 10 years at the client's election up to one week after mobilization. The estimated contract revenues which could be generated over the five-year, seven-year and 10-year contract terms are approximately $1.01 billion, $1.35 billion, and $1.85 billion (assuming the client elects to keep the operating dayrate fixed for the full 10 years and does not terminate the contract early as described below), respectively. Estimated contract revenues represent the maximum amount of revenue that may be earned in the firm contract period, excluding revenues for mobilization, demobilization, and miscellaneous adjustments.
If the client elects to extend the contract to 10 years, then the client may further elect to have the operating dayrate for the second five years of the contract fluctuate based on crude oil prices. In such case, the operating dayrate for the second five years (i) will not be adjusted if crude oil is at $75 per barrel, (ii) will be adjusted upward on a straightline basis if crude oil is between $75 per barrel and $100 per barrel, with a maximum positive adjustment of approximately 10% if crude oil is at or above $100 per barrel, and (iii) will be adjusted downward on a straightline basis if crude oil is between $75 per barrel and $50 per barrel, with a maximum negative adjustment of approximately 10% if crude oil is at or below $50 per barrel.
The client retains the right to terminate the contract for convenience. If the client (i) elects to stay with a five-year term, (ii) elects to extend the contract to seven years, or (iii) elects to extend the contract to 10 years and allow operating dayrates to fluctuate with oil prices, then the termination mechanism in the contract is designed to keep Transocean economically whole for the remaining term of the contract. However, if the client elects to extend the contract to 10 years and the dayrate is fixed, then the client will have a right to terminate the contract for convenience with one year's prior notice which will result in total payments to Transocean ranging from $1.1 billion over a five-year period to $1.85 billion over a 10-year period (which includes paid and unpaid dayrate as well as a termination fee ranging from $100 million to $175 million), and, depending on the date of termination, may result in a discount to the estimated contract revenues that could have otherwise been generated over the 10-year period.
One of Transocean's subsidiaries has executed a shipyard contract with Daewoo Shipbuilding and Marine Engineering Co., Ltd. regarding the construction of the dynamically positioned, double-hull drillship. The construction is scheduled to take place at Daewoo's yard in Okpo, South Korea, where four of Transocean's previously announced enhanced Enterprise-class drillships are currently being constructed. The total capital costs for the drillship are estimated to be approximately $730 million, excluding capitalized interest.
The rig will feature:
* Transocean's patented dual-activity drilling technology, allowing for parallel drilling operations designed to save time and money in deepwater well construction;
* A variable deckload of 20,000 metric tons; and
* The capability of drilling in up to 10,000 feet of water depth, upgradeable to 12,000 feet of water depth and 40,000 feet of total drilling depth with additional equipment.
Statements regarding the enhanced Enterprise-class newbuild drillship, operating specifications and dayrates, contract durations, contract commencement dates, contract termination payments and fees, estimated contract revenues, estimated capital costs, duration and location of construction, as well as any other statements that are not historical facts, are forward-looking statements that involve certain risks, uncertainties and assumptions. These include but are not limited to operating hazards and delays, actions by customers and other third parties, factors affecting the duration of contracts including well-in-progress provisions, the actual amount of downtime including shipyard and maintenance projects, factors resulting in dayrates lower than the contractual dayrate, the future price of oil and gas and other factors detailed in the company's most recent Form 10-K and other filings with the Securities and Exchange Commission (SEC), which are available free of charge on the SEC's website at www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.
Transocean Inc. is the world's largest offshore drilling contractor and the leading provider of drilling management services worldwide. With a fleet of 138 mobile offshore drilling units plus nine announced ultra-deepwater newbuild units, the company's fleet is considered one of the most modern and versatile in the world due to its emphasis on technically demanding segments of the offshore drilling business. The company owns or operates a contract drilling fleet of 39 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment semisubmersibles and drillships), 29 Midwater Floaters, 10 High-Specification Jackups, 56 Standard Jackups and other assets utilized in the support of offshore drilling activities worldwide.
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