Marine Log

September 7, 2006

Thule Drilling loans yard $22 million

Norway's Thule Drilling ASA seems to be learning that there can be challenges in building jackup rigs in new places.

Thule selected the QGM Yard in the United Arab Emirates to reconstruct a damaged jack-up drilling rig into a modern 250 ft water depth unit and to build two 300 ft water depth Friede & Goldman Super M2 design jack-ups.

Yesterday, Thule said it had entered into a loan agreement to provides QGM with a $22 million loan facility "to improve QGM's financial standing, thereby ensuring timely delivery of the three jack-ups. The credit facility will be used to finance vital current and future investments in infrastructure, and plant and machinery at the yard."

The loan carries an interest rate of 10.5 %. The loan is secured through first priority pledge in the shares of QGM, inventory, and plant and equipment belonging to QGM. The loan matures on 31 May 2008. Repayment of the loan will mainly be based on the following conditions:

Tranche 1: $12 million is due on 31 May 2008, with a discount of 30% if the (reconstructed) Thule Power is delivered before 15 February 2007, which will allow for arrival at location in Saudi Arabian waters before penalties for delayed delivery starts accruing under the Saudi Aramco long term contract. This timely delivered discount/bonus will be added to the total project cost of $100 million (including finance) of Thule Power .

Tranche 2: $10 million is also due on 31 May 2008. However, if (newbuilds)Thule Energy and Thule Force are delivered on schedule, which is end November 2007 and end of March 2008, respectively, plus a 3 month grace period, the loan will be converted into a timely bonus of USD 5 million for each rig. This timely delivery bonus, if awarded, will be added to the rig cost of $125 million including $3 million contingency and $ 2 million site supervision.

Thule says "the price for all three units is, even if the bonuses are awarded, still very competitive and about $ 20-25 million less than comparable designs with almost the same specification and equipment being constructed at other yards, and with later deliveries."

If QGM fails to repay the loans or meet delivery deadlines, Thule has the option to acquire between 35-100% of QGM from its owners at no cost.

Thule says QGM is a qualified offshore rig building yard with fully developed infrastructure, offices, accommodation for up to 1000 workers, warehouses, workshops and machinery ... ideally placed at a prime location in the busiest and fastest growing area of the Middle East.

As part of the loan condition, the exercise of Thule's nine newbuilding options at QGM has been extended by three months, at a price limited to the level of Thule Energy and Thule Force with added adjustments for price increase in steel, equipment and labor.