Ocean Rig has entered into a final contract for a two-year term with Shell U.K. Ltd, Shell Exploration and Production Ireland and Norske Shell for the drilling rig Leiv Eiriksson. The contract is for deepwater drilling operations in the Atlantic Margin, and covers the UK, Ireland, Faroes & Norway. The firm contract value is estimated to be in the range of $340-350 million (based on estimated 40% operating time in Norwegian sector).
The contract will commence in direct continuation of the current Total contract, expected to be in the 2nd quarter 2007. In addition, Shell has been granted a non-exclusive option for a one-year extension to the term of the contract. As a result, Leiv Eiriksson now has continuous employment to the 2nd quarter 2009 (2nd quarter 2010 including the option). If the option is declared by Shell, estimated additional value is approximately $ 195 million. Total contract backlog for Ocean Rig, with an average firm duration of about 3 years (3.5 years including the Shell option), is now approximately $ 870 million (excluding the Shell option).
Geir Aune said: "The company will generate a strong future cash flow based on an average day rate from the 2nd quarter 2007 of $ 430.000 - 450.000. The market for our segment continues to be very tight with limited availability for 2008."