September 22, 2006
ENSCO orders ultra deepwater semi
ENSCO International Incorporated (NYSE:ESV) has entered into a drilling contract with a consortium of three independent oil companies to provide a new ultra-deepwater semisubmersible drilling rig to be named ENSCO 8500. The drilling contract with Anadarko Petroleum Corporation, Dominion Exploration & Production, Inc. and Kerr-McGee Oil & Gas Corporation is for a firm, four-year primary term, plus four one-year extension options. Aggregate revenue expected during the four-year primary term is approximately $385 million, including approximately $20 million payable upon delivery of the rig. Under the terms of the agreement, ENSCO will be reimbursed for mobilization and other start-up costs, and day rates will be adjusted for future variances in operating cost.
ENSCO says it has entered into an agreement with Keppel FELS Limited in Singapore to construct ENSCO 8500, with delivery currently anticipated by the second quarter of 2008. The total construction cost of the rig is currently expected to be approximately $312 million.
ENSCO 8500 will be an enhanced version of the company's first deepwater semisubmersible rig, ENSCO 7500. ENSCO 8500 will be capable of drilling in up to 8,500 feet of water, and can readily be upgraded to 10,000 feet water-depth capability if required. Enhancements to the new rig include a two million pound quad derrick, offline pipe handling capability, increased drilling capacity, greater variable deck load, and improved automatic station keeping ability. With these features, ENSCO 8500 will be especially well-suited for deepwater development drilling.
Carl F. Thorne, ENSCO's Chairman and Chief Executive Officer, commented: "We believe the ENSCO 8500 project will be a win/win transaction for our customers and our shareholders. ENSCO 8500 is expected to provide a cost-effective deepwater drilling solution to a consortium of important oil company customers, while expanding ENSCO's deepwater capability on a conservative and financially attractive basis.
"We are pleased to again be working with the Keppel FELS shipyard, with which we have a longstanding relationship. This will be our sixth new construction project with Keppel FELS, either in partnership, or in keeping with more conventional arrangements. ENSCO and Keppel FELS have a history of successfully delivering high-quality newbuild rigs on time and within budget.
"Many factors contributed to the transaction, including the ENSCO proprietary rig design, and its history of efficient and cost-effective operations, our customers' confidence in and commitment to the project, and the involvement of a shipyard with a history of meeting quality, cost and timing commitments. These factors served to create an environment for the consummation of a transaction that will benefit all stakeholders, while also enabling ENSCO to meet its long-stated return and capital recovery hurdles."