Newbuild Drillship to Have a 10-Year Drilling Contract With an Optional 10-Year Extension
HOUSTON, June 23, 2008 (PRIME NEWSWIRE) -- Transocean Inc. (NYSE:RIG) today announced that its subsidiaries have reached an agreement with subsidiaries of Petrobras and Mitsui to acquire a newbuild ultra-deepwater drillship under a capital lease contract. In conjunction with the capital lease contract, subsidiaries of Petrobras and Transocean have entered into a 10-year drilling contract covering worldwide operations with an option by Petrobras to extend the term of the drilling contract by up to an additional 10 years.
The capital lease contract has a 20-year term, after which Transocean will have the right and obligation to acquire the drillship for $1. Total capital costs to be incurred by Petrobras and Mitsui for the construction of the drillship are estimated to be $750 million, including $65 million of capitalized interest.
The 10-year drilling contract is expected to commence in the third quarter of 2009 following shipyard construction, sea trials, mobilization and customer acceptance. The drilling contract commencement is contingent on vendor performance and other factors. At least 12 months prior to the expiration of the initial 10-year term, Petrobras may elect to extend the term of the drilling contract by up to an additional 10 years at a mutually agreed operating dayrate which would then apply to the extension period.
Contract revenues over the initial 10-year contract term are estimated to be $1.68 billion, including monthly bonuses which could be as high as 12 percent of dayrate revenue each month. Estimated contract revenues are before taxes, which will be paid by Transocean and fully reimbursed by Petrobras. Additionally if the rig is operating in a jurisdiction where the company has a valid dual activity patent, an additional 5 percent royalty would be paid to Transocean. Estimated contract revenues represent the maximum amount of revenue that may be earned in the firm 10-year contract period, excluding revenues for reimbursed taxes, royalties, mobilization, demobilization and cost escalation.